Lysosomes mediate degradation of macromolecules to their precursors for their cellular recycling. Additionally, lysosome-related organelles mediate cell type-specific functions. The Chédiak-Higashi syndrome is an autosomal, recessive disease, in which loss of the protein LYST causes defects in lysosomes and lysosome-related organelles. The molecular function of LYST, however, is largely unknown. Here, we dissected the function of the yeast LYST homolog, Bph1. We show that Bph1 is an endosomal protein, and an effector of the minor Rab5 isoform Ypt52. Strikingly, the bph1▵ mutant has lipidated Atg8 on their endosomes, which is sorted via late endosomes into the vacuole lumen under non-autophagy inducing conditions. In agreement, proteomics of bph1▵ vacuoles reveal an accumulation of Atg8, reduced flux via selective autophagy, and defective endocytosis. Additionally, bph1▵ cells have reduced autophagic flux under starvation conditions. Our observations suggest that Bph1 is a novel Rab5 effector that maintains endosomal functioning. When lost, Atg8 is lipidated at endosomes even during normal growth and ends up in the vacuole lumen. Thus, our results contribute to the understanding of the role of LYST-related proteins and associated diseases.