The sorting of transmembrane cargo proteins into the lumenal vesicles of multivesicular bodies (MVBs) depends on the recruitment of endosomal sorting complexes required for transport (ESCRTs) to the cytosolic face of endosomal membranes. The subsequent dissociation of ESCRT complexes from endosomes requires Vps4, a member of the AAA family of adenosine triphosphatases. We show that Did2 directs Vps4 activity to the dissociation of ESCRT-III but has no role in the dissociation of ESCRT-I or -II. Surprisingly, vesicle budding into the endosome lumen occurs in the absence of Did2 function even though Did2 is required for the efficient sorting of MVB cargo proteins into lumenal vesicles. This uncoupling of MVB cargo sorting and lumenal vesicle formation suggests that the Vps4-mediated dissociation of ESCRT-III is an essential step in the sorting of cargo proteins into MVB vesicles but is not a prerequisite for the budding of vesicles into the endosome lumen.