The "class E" vacuolar protein sorting (VPS) pathway mediates sorting of ubiquitinated cargo into the forming vesicles of the multivesicular bodies (MVB), and it is essential for down-regulation of signaling by growth factors and budding of enveloped viruses such as Ebola and HIV-1. Work in yeast has identified DOA4 as a gene that is recruited by the class E machinery to remove ubiquitin from the endosomal cargo before it is incorporated into MVB vesicles, but the identity of the mammalian counterpart is unclear. Here we report the interaction of AMSH (associated molecule with the SH3 domain of STAM), an endosomal deubiquitinating enzyme, with the endodomal sorting complex required for transport (ESCRT-III) subunits CHMP1A, CHMP1B, CHMP2A, and CHMP3. We also show that a catalytically inactive AMSH inhibits retroviral budding in a dominant-negative manner and induces the accumulation of ubiquitinated forms of an endosomal cargo, namely murine leukemia virus Gag. Finally, VPS4 and AMSH compete for binding to the C-terminal regions of CHMP1A and CHMP1B, revealing a coordinated interaction with ESCRT-III. Taken together, these results are consistent with a role of AMSH in the deubiquitination of the endosomal cargo preceding lysosomal degradation.Ubiquitin plays an essential role in the trafficking of membrane proteins into the degradative lysosomal pathway. Covalent attachment of ubiquitin to certain activated cell surface receptors serves as a sorting signal for entry into the endocytic vesicles at the plasma membrane (1). Subsequently to this internalization, the class E vacuolar protein sorting (VPS) 2 pathway directs the ubiquitinated cargo into the forming vesicles of the late endosomal compartment, termed multivesicular bodies (MVB) (2, 3). In the last step, the MVB fuses with the lysosomal membrane and the cargo is delivered to the lumen of the lysosome for degradation.Work in yeast has identified 18 class E VPS proteins that are required for sorting into the lumen of MVBs (2, 4, 5). Importantly, at least one human homolog for every class E protein has been identified and recent studies show that most of the protein-protein interactions between the class E proteins are conserved from yeasts to humans (6 -8). A subset of class E proteins form one of three endosomal sorting complexes required for transport (ESCRT-I, -II, and -III) (9 -11), and current models propose that these complexes are sequentially recruited by the endosomal cargo, forming a membrane-associated lattice that functions in vesicle invagination during MVB biogenesis. ESCRT-III is believed to contain the core sorting machinery of the class E pathway and it is composed of two functional subcomplexes, a membrane-proximal complex that interacts with the endosomal membrane and a peripheral subcomplex that seems to recruit accessory proteins (9).After completion of cargo sorting and vesicle formation, ESCRT-III recruits the AAA ATPase Vps4 through direct protein-protein interactions, mediating the disassembly of the ESCRT machinery for recycling in...