Modification of target molecules by ubiquitin or ubiquitin-like (Ubl) proteins is generally reversible. Little is known, however, about the physiological function of the reverse reaction, deconjugation. Atg8 is a unique Ubl protein whose conjugation target is the lipid phosphatidylethanolamine (PE). Atg8 functions in the formation of double-membrane autophagosomes, a central step in the well-conserved intracellular degradation pathway of macroautophagy (hereafter autophagy). Here we show that the deconjugation of Atg8-PE by the cysteine protease Atg4 plays dual roles in the formation of autophagosomes. During the early stage of autophagosome formation, deconjugation releases Atg8 from non-autophagosomal membranes to maintain a proper supply of Atg8. At a later stage, the release of Atg8 from intermediate autophagosomal membranes facilitates the maturation of these structures into fusion-capable autophagosomes. These results provide new insights into the functions of Atg8-PE and its deconjugation.