The YPT7 gene encodes the Saccharomyces cerevisiae homolog of mammalian rab7 protein. Data obtained from studies on a delta ypt7 mutant suggested that Ypt7p is involved in the endocytic pathway in yeast (Wichmann et al., Cell 71, 1131–1142, 1992). We report here that endocytosed pheromone alpha-factor accumulates in late endosomes in delta ypt7 cells, indicating that Ypt7p is involved in the regulation of transport steps from late endosomes to the vacuole. We also show that alpha-factor can be degraded in a PEP4-dependent manner in a prevacuolar/endosomal compartment in delta ypt7 cells, providing independent evidence that the pathways of vacuole biogenesis and endocytosis in yeast may intersect in the endosomal membrane system.