The multivesicular body (MVB) pathway is responsible for both the biosynthetic delivery of lysosomal hydrolases and the downregulation of numerous activated cell surface receptors which are degraded in the lysosome. We demonstrate that ubiquitination serves as a signal for sorting into the MVB pathway. In addition, we characterize a 350 kDa complex, ESCRT-I (composed of Vps23, Vps28, and Vps37), that recognizes ubiquitinated MVB cargo and whose function is required for sorting into MVB vesicles. This recognition event depends on a conserved UBC-like domain in Vps23. We propose that ESCRT-I represents a conserved component of the endosomal sorting machinery that functions in both yeast and mammalian cells to couple ubiquitin modification to protein sorting and receptor downregulation in the MVB pathway.