The lipid raft concept proposes that biological membranes have the potential to form functional domains based on a selective interaction between sphingolipids and sterols. These domains seem to be involved in signal transduction and vesicular sorting of proteins and lipids. Although there is biochemical evidence for lipid raft-dependent protein and lipid sorting in the yeast Saccharomyces cerevisiae, direct evidence for an interaction between yeast sphingolipids and the yeast sterol ergosterol, resulting in membrane domain formation, is lacking. Here we show that model membranes formed from yeast total lipid extracts possess an inherent self-organization potential resulting in liquid-disordered-liquid-ordered phase coexistence at physiologically relevant temperature. Analyses of lipid extracts from mutants defective in sphingolipid metabolism as well as reconstitution of purified yeast lipids in model membranes of defined composition suggest that membrane domain formation depends on specific interactions between yeast sphingolipids and ergosterol. Taken together, these results provide a mechanistic explanation for lipid raft-dependent lipid and protein sorting in yeast.The membranes that surround the various organelles of eukaryotic cells have distinct lipid compositions. For example, the concentration of sphingolipids and sterols increases along the secretory pathway, being lowest in the endoplasmic reticulum and highest at the plasma membrane (1-3). The major sorting station for vesicular transport of proteins and lipids within the cell is the trans-Golgi network (4). Here, clusters of sphingolipids and sterols as well as proteins have been proposed to be involved in the formation of secretory vesicles (SVs) 3 (5, 6). These clusters, called lipid rafts, were proposed to form by the preferential interaction between lipids containing saturated acyl chains, especially (glyco-) sphingolipids and sterols, and by intermolecular hydrogen bonds between (glyco-) sphingolipids. As compared with bulk cellular membranes, lipid rafts are characterized by a higher acyl chain order and tight packing of lipids (7). Protein-free model membranes have been widely used to study the self-associative properties of sphingolipids and sterols, which are believed to be responsible for lipid raft formation in vivo (8,9). In model membranes with a lipid composition similar to that of detergent-resistant membranes (DRMs) from mammalian cells, the preferential interaction between sphingolipids and sterols is manifested as the coexistence of two fluid membrane phases, which can be observed microscopically in giant unilamellar vesicles (GUVs) (10 -13). More specifically, model membranes produced from equimolar mixtures of sphingomyelin (SM), phosphatidylcholine (PC), and cholesterol show domains in the liquid-disordered (Ld) state that are enriched in PC coexisting with a liquid-ordered (Lo) phase rich in SM and cholesterol, the latter being a defining component of the Lo phase (14, 15). The Lo phase is characterized by a higher acyl chain (...