Exosomes are vesicles secreted to the extracellular environment through fusion with the plasma membrane of specific endosomes called multivesicular bodies (MVB) and mediate cell-to-cell communication in many biological processes. Posttranslational modifications are involved in the sorting of specific proteins into exosomes. Here we identify ISGylation as a ubiquitin-like modification that controls exosome release. ISGylation induction decreases MVB numbers and impairs exosome secretion. Using ISG15-knockout mice and mice expressing the enzymatically inactive form of the de-ISGylase USP18, we demonstrate in vitro and in vivo that ISG15 conjugation regulates exosome secretion. ISG15 conjugation triggers MVB co-localization with lysosomes and promotes the aggregation and degradation of MVB proteins. Accordingly, inhibition of lysosomal function or autophagy restores exosome secretion. Specifically, ISGylation of the MVB protein TSG101 induces its aggregation and degradation, being sufficient to impair exosome secretion. These results identify ISGylation as a novel ubiquitin-like modifier in the control of exosome production.