New light curves and available times of minima of a beta Lyr system EG Cep were analysed to deduce more information on the nature of the system. The main U-shaped (O - C) variation was interpreted in terms of the mass transfer and mass loss in the system. The same variation was also considered as a part of a sinusoidal variation and thus interpreted in terms of a light-time effect due to an unseen component in the system. New B and V light curves were analyzed with different fitting procedures, and there is general agreement that both stars must be very close to each other and to stability limits. A model that fits all the data well has a near main sequence primary and a secondary star that is overflowing matter towards it. This secondary is also reasonably close to main sequence conditions. The configuration thus appears to be a (relatively uncommon) ' Case A ' type evolving Algol and raises interesting questions about such interactive evolution and potentially useful tests of theory.