Late endosomes, which have the morphological characteristics of multivesicular bodies, have received relatively little attention in comparison with early endosomes and lysosomes. Recent work in mammalian and yeast cells has given insights into their structure and function, including the generation of their multivesicular morphology. Lipid partitioning to create microdomains enriched in specific lipids is observed in late endosomes, with some lumenal vesicles enriched in lysobisphosphatidic acid and others in phosphatidylinositol 3-phosphate. Sorting of membrane proteins into the lumenal vesicles may occur because of the properties of their trans-membrane domains, or as a result of tagging with ubiquitin. Yeast class E Vps proteins and their mammalian orthologs are the best candidates to make up the protein machinery that controls inward budding, a process that starts in early endosomes. Late endosomes are able to undergo homotypic fusion events and also heterotypic fusion with lysosomes, a process that delivers endocytosed macromolecules for proteolytic degradation.