AbstractBackground: In the methylotrophic yeast Pichia pastoris, peroxisomes can be selectively degraded through direct engulfment by the vacuole in a process known as micropexophagy, but the mechanism of micropexophagy is not known.Results: To gain molecular insights into micropexophagy, we used fluorescence time‐lapse microscopy, coupled with gene‐tagging mutagenesis to isolate P. pastoris mutants defective in micropexophagy. The relevant genes have been designated PAZ genes. Morphological and genetic analyses enabled us to postulate a schematic model for micropexophagy. This new model invokes the generation of new vacuolar compartments as an intermediate structure during micropexophagy. Different classes of paz mutants arrest micropexophagy at distinct stages of the process. Most of APG‐related paz mutants ceased micropexophagy at Stage 1c and that GCN‐family paz mutants ceased micropexophagy at Stage 2. The paz2Δ strain shows a unique phenotype. Paz2 is the homologue of Saccharomyces cerevisiae Apg8, which is necessary for macroautophagy in that yeast. Our analysis revealed that in P. pastoris, Paz2 plays a key role in repressing the engulfment of peroxisomes by the vacuole before the onset of micropexophagy. Paz2 is proteolytically processed by another autophagy‐related Paz protein Paz8, but this processing is not required for the ability of Paz2 to suppress aberrant micropexophagy.Conclusion: Micropexophagy has been dissected into a multistep reaction that involves 14 identified Paz gene products. Our studies indicate that Paz2 controls the engulfment of peroxisomes by the vacuole, pointing to a novel early function of this protein.