The S. cerevisiae VPS10 (vacuolar protein sorting) gene encodes a type I transmembrane protein of 1577 amino acids required for the sorting of the soluble vacuolar protein carboxypeptidase Y (CPY). Mutations in VPS10 result in the selective missorting and secretion of CPY; all other vacuolar proteins tested are delivered to the vacuole in vps10 mutants. Chemical cross-linking studies demonstrate that Vps10p and the Golgi-modified precursor form of CPY directly interact. A single amino acid change in the CPY vacuolar sorting signal prevents this interaction. Vps10p also interacts with a hybrid protein containing the CPY sorting signal fused to the normally secreted enzyme invertase. Subcellular fractionation indicates that the majority of Vps10p is localized to a late Golgi compartment where vacuolar proteins are sorted. We propose that VPS10 encodes a CPY sorting receptor that executes multiple rounds of sorting by cycling between the late Golgi and a prevacuolar endosome-like compartment.