Multivesicular endosomes are important as compartments for receptor downregulation and as intermediates in the formation of secretory lysosomes. Work during the past year has shed light on the molecular mechanisms of protein sorting into multivesicular endosomes and yielded information about the machinery involved in multivesicular endosome formation. Monoubiquitination functions as a signal for sorting transmembrane proteins into intraluminal vesicles of multivesicular endosomes and subsequent delivery to lysosomes. A molecular machinery that contains the ubiquitin-binding protein Hrs/Vps27 appears to be central in this sorting process. Three conserved multisubunit complexes, ESCRT-I, -II and -III, are essential for both sorting and multivesicular endosomes formation. Enveloped RNA viruses such as HIV can redirect these complexes from multivesicular endosomes to the plasma membrane to facilitate viral budding.