A multivesicular body is a vesicle-filled endosome that targets proteins to the interior of lysosomes. We have identified a conserved eukaryotic protein, human CHMP1, which is strongly implicated in multivesicular body formation. Immunocytochemistry and biochemical fractionation localize CHMP1 to early endosomes and CHMP1 physically interacts with SKD1/VPS4, a highly conserved protein directly linked to multivesicular body sorting in yeast. Similar to the action of a mutant SKD1 protein, overexpression of a fusion derivative of human CHMP1 dilates endosomal compartments and disrupts the normal distribution of several endosomal markers. Genetic studies in Saccharomyces cerevisiae further support a conserved role of CHMP1 in vesicle trafficking. Deletion of CHM1, the budding yeast homolog of CHMP1, results in defective sorting of carboxypeptidases S and Y and produces abnormal, multi-lamellar prevacuolar compartments. This phenotype classifies CHM1 as a member of the class E vacuolar protein sorting genes. Yeast Chm1p belongs to a structurally-related, but rather divergent family of proteins, including Vps24p and Snf7p and three novel proteins, Chm2p, Chm5p and Chm6p, which are all essential for multivesicular body sorting. These observations identify the conserved CHMP/Chmp family as a set of proteins fundamental to understanding multivesicular body sorting in eukaryotic organisms.