Most eukaryotic cells target ubiquitinated plasma membrane (PM) proteins for vacuolar degradation in response to environmental and developmental cues. This process involves endosomal sorting complexes required for transport (ESCRT). However, little is known about the cellular mechanisms of ESCRTs in plants. Here, we studied the function of one ESCRT-II component, VPS36, which shows ubiquitin-binding activity and may form a putative ESCRT-II with VPS22 and VPS25 in Arabidopsis (Arabidopsis thaliana). Recessive mutation of the ubiquitously expressed VPS36 causes multiple defects, including delayed embryogenesis, defective root elongation, and limited expansion of cotyledons, and these effects can be complemented by its genomic DNA. Abnormal intracellular compartments containing several membrane transporters, including members of the PIN-FORMEDs, AUXIN RESISTANT 1, and PIP1 families, were found in vps36-1 plants. Employing a genetic approach to cross vps36-1/+ with transgenic plants harboring various fluorescent protein-tagged organelle markers, as well as fluorescent probe and ultrastructural approaches, revealed PM proteins in microsomal fractions from vps36-1 seedlings and demonstrated that VPS36 is critical for forming multivesicular bodies and vacuolar biogenesis for protein degradation. Our study shows that functional VPS36 is essential for a proper endosomal sorting pathway and for vacuolar biogenesis in Arabidopsis.