Hrs and the endosomal sorting complexes required for transport, ESCRT-I, -II, and -III, are involved in the endosomal sorting of membrane proteins into multivesicular bodies and lysosomes or vacuoles. The ESCRT complexes are also required for formation of intraluminal endosomal vesicles and for budding of certain enveloped RNA viruses such as HIV. Here, we show that Hrs binds to the ESCRT-I subunit Tsg101 via a PSAP motif that is conserved in Tsg101-binding viral proteins. Depletion of Hrs causes a reduction in membrane-associated ESCRT-I subunits, a decreased number of multivesicular bodies and an increased size of late endosomes. Even though Hrs mainly localizes to early endosomes and Tsg101 to late endosomes, the two proteins colocalize on a subpopulation of endosomes that contain lyso-bisphosphatidic acid. Overexpression of Hrs causes accumulation of Tsg101 on early endosomes and prevents its localization to late endosomes. We conclude that Hrs mediates the initial recruitment of ESCRT-I to endosomes and, thereby, indirectly regulates multivesicular body formation.