The conserved vacuolar protein-sorting (Vps) pathway controls the trafficking of proteins to the vacuole/lysosome. Both the internalization of ubiquitylated cargo from the plasma membrane and its sorting at the late endosome via the Vps pathway depend on ubiquitin (Ub) binding motifs present in trafficking regulators. Here we report that Ub controls yet a third step in the Vps pathway. Vps9p, which promotes endosomal and Golgi-derived vesicle fusion, binds directly to Ub via a Cue1p-homologous (CUE) domain. The CUE domain is structurally related to the Ub-associated (UBA) domain. In an assay for vacuolar delivery of a transmembrane receptor fused to Ub, a Ub mutation impairing interaction with Vps9p led to a cytoplasmic block in receptor trafficking. This block resembled that of a receptor fused to wild-type Ub but expressed in a vps9-null background. Strikingly, this trafficking defect caused by a mutant Ub was rescued by deletion of the Vps9p CUE domain, indicating that lack of the CUE domain renders Vps9p independent of Ub for activation in vivo. We thus provide evidence for biochemical and genetic interactions between Ub and a novel Ub binding domain in Vps9p. Ub plays a positive role, whereas the CUE domain plays both positive and negative roles in Vps9p function in trafficking.