Cellular homeostasis requires the ubiquitin‐dependent degradation of membrane proteins. This was assumed to be mediated exclusively either by endoplasmic reticulum‐associated degradation (
ERAD
) or by endosomal sorting complexes required for transport (
ESCRT
)‐dependent lysosomal degradation. We identified in
Saccharomyces cerevisiae
an additional pathway that selectively extracts membrane proteins at Golgi and endosomes for degradation by cytosolic proteasomes. One endogenous substrate of this endosome and Golgi‐associated degradation pathway (
EGAD
) is the
ER
‐resident membrane protein Orm2, a negative regulator of sphingolipid biosynthesis. Orm2 degradation is initiated by phosphorylation, which triggers its
ER
export. Once on Golgi and endosomes, Orm2 is poly‐ubiquitinated by the membrane‐embedded “Defective in
SREBP
cleavage” (Dsc) ubiquitin ligase complex. Cdc48/
VCP
then extracts ubiquitinated Orm2 from membranes, which is tightly coupled to the proteasomal degradation of Orm2. Thereby,
EGAD
prevents the accumulation of Orm2 at the
ER
and in post‐
ER
compartments and promotes the controlled de‐repression of sphingolipid biosynthesis. Thus, the selective degradation of membrane proteins by
EGAD
contributes to proteostasis and lipid homeostasis in eukaryotic cells.