Multivesicular bodies (MVBs) are late endosomal compartments containing luminal vesicles (MVB vesicles) that are formed by inward budding of the endosomal membrane. In budding yeast, MVBs are an important cellular mechanism for the transport of membrane proteins to the vacuolar lumen. This process requires a class E subset of vacuolar protein sorting (VPS) genes. VPS44 (allelic to NHX1) encodes an endosomelocalized Na ؉ /H ؉ exchanger. The function of the VPS44 exchanger in the context of vacuolar protein transport is largely unknown. Using a cell-free MVB formation assay system, we demonstrated that Nhx1p is required for the efficient formation of MVB vesicles in the late endosome. The recruitment of Vps27p, a class E Vps protein, to the endosomal membrane was dependent on Nhx1p activity and was enhanced by an acidic pH at the endosomal surface. Taken together, we propose that Nhx1p contributes to MVB formation by the recruitment of Vps27p to the endosomal membrane, possibly through Nhx1p antiporter activity.Multivesicular bodies (MVBs) 3 are a subset of late endosomes that contain internal vesicles, permitting precursor and plasma membrane proteins to reach the lysosome or vacuole lumen for degradation or maturation, respectively. In eukaryotic cells, the MVB pathway controls various important processes such as receptor down-regulation, antigen presentation, cytokinesis, retroviral budding, and autophagy (1-6). In the budding yeast Saccharomyces cerevisiae, previous studies identified a number of genes involved in vacuolar protein sorting (VPS) (7,8). These Vps proteins function at distinct steps of protein transport between the Golgi complex and the vacuole (7,8). A subset of Vps proteins, class E proteins, is involved in MVB formation. Most class E proteins are components of five distinct complexes; Vps27p-Hse1p (also called endosomal sorting complexes required for transport-0 (ESCRT-0), -I, -II, and -III and Vps4p. These complexes are required for the formation of internal vesicles and sorting of cargo proteins to the vesicles from the endosomal membrane (3, 9). Vps27p (ESCRT-0) recruits ESCRT-I, which in turn recruits and/or activates ESCRT-II and ESCRT-III at the endosome (3, 10). Recent in vitro studies have provided new insights into the precise role of each ESCRT complex in MVB formation (11-13). ESCRT-0 initiates the MVB sorting process by recruiting ESCRT-I to the endosomal membrane and concentrating ubiquitylated MVB cargos to the vesicle budding site (12). ESCRT-I and ESCRT-II are directly involved in membrane budding by stabilizing the bud necks, whereas ESCRT-III is responsible for the cleavage of bud necks (11-13). Finally, the AAA-type ATPase Vps4p dissociates the ESCRT-III complex from the endosome (14). The sequential activity of these complexes on the cytoplasmic surface of endosomes directs the budding and fission of vesicles into the lumen of the endosome and the sequestration of cargo proteins in the vesicle. Defects in ESCRT proteins prevent internal vesicle formation and result in exagg...