Yeast endosomes, like those in animal cells, invaginate their membranes to form internal vesicles. The resulting multivesicular bodies fuse with the vacuole, the lysosome equivalent, delivering the internal vesicles for degradation. We have partially purified internal vesicles and analysed their content. Besides the known component carboxypeptidase S (Cps1p), we identified a polyphosphatase (Phm5p), a presumptive haem oxygenase (Ylr205p/Hmx1p) and a protein of unknown function (Yjl151p/Sna3p). All are membrane proteins, and appear to be cargo molecules rather than part of the vesicle-forming machinery. We show that both Phm5p and Cps1p are ubiquitylated, and that in a doa4 mutant, which has reduced levels of free ubiquitin, Cps1p, Phm5p and Hmx1p are mis-sorted to the vacuolar membrane. Mutation of Lys 6 in the cytoplasmic tail of Phm5p disrupts its sorting, but sorting is restored, even in doa4 cells, by the biosynthetic addition of a single ubiquitin chain. In contrast, Sna3p enters internal vesicles in a ubiquitin-independent manner. Thus, ubiquitin acts as a signal for the partitioning of some, but not all, membrane proteins into invaginating endosomal vesicles.