The success of Mycobacterium as a pathogen hinges on its ability to modulate its intracellular environment. Mycobacterium avium reside in vacuoles with limited proteolytic activity, maintain cathepsin D in an immature form and remain accessible to internalized transferrin. Artificial acidification of isolated phagosomes facilitated processing of cathepsin D, demonstrating that pH alone limits proteolysis in these vacuoles. Moreover, analysis of IgG-bead phagosomes at early time points during their formation indicates that these phagosomes also acquire LAMP 1 and cathepsin D prior to the accumulation of proton-ATPases, and are transiently accessible to sorting endosomes. This suggests that the anomolous distribution of endosomal proteins in M. avium-containing vacuoles results from their arrested differentiation in an early transitional stage through which all phagosomes pass.