From the budding yeast S. cerevisiae, we have cloned a gene, YPT7, that encodes a GTP-binding protein belonging to the Ypt family of ras-related proteins. The 208 amino acid protein shares identical effector domain and C-terminal sequences with the mammalian Rab7 protein. YPT7 gene disruption did not impair cellular growth at temperatures ranging from 17 degrees C to 37 degrees C. ypt7 null mutants are characterized by highly fragmented vacuoles and differential defects of vacuolar protein transport and maturation. The uptake of alpha factor pheromone by wild-type and Ypt7p-deficient cells was found to be indistinguishable, but in mutant cells lacking Ypt7p, degradation of the endocytosed pheromone was severely inhibited. Our findings suggest a role of Ypt7p in protein transport between endosome-like compartments.