Delivery of proteins and organelles to the vacuole by autophagy and the cytoplasm to vacuole targeting (Cvt) pathway involves novel rearrangements of membrane resulting in the formation of vesicles that fuse with the vacuole. The mechanism of vesicle formation and the origin of the membrane are complex issues still to be resolved. Atg18 and Atg21 are proteins essential to vesicle formation and together with Ygr223c form a novel family of phosphoinositide binding proteins that are associated with the vacuole and perivacuolar structures. Their localization requires the activity of Vps34, suggesting that phosphatidylinositol(3)phosphate may be essential for their function. The activity of Atg18 is vital for all forms of autophagy, whereas Atg21 is required for the Cvt pathway but not for nitrogen starvation-induced autophagy. The loss of Atg21 results in the absence of Atg8 from the pre-autophagosomal structure (PAS), which may be ascribed to a reduced rate of conjugation of Atg8 to phosphatidylethanolamine. A similar defect in localization of a second ubiquitin-like conjugate, Atg12-Atg5, suggests that Atg21 may be involved in the recruitment of membrane to the PAS.