The dynamic evolution of organelle compartmentalization in eukaryotes and how strictly compartmentalization is maintained are matters of ongoing debate. While the endoplasmic reticulum (ER) is classically envisioned as the site of protein cotranslational translocation, it has recently been proposed to have pluripotent functions. Using transfected reporter constructs, organelle-specific markers, and functional enzyme assays, we now show that in an early-diverging protozoan, Giardia lamblia, endocytosis and subsequent degradation of exogenous proteins occur in the ER or in an adjacent and communicating compartment. The Giardia endomembrane system is simple compared to those of typical eukaryotes. It lacks peroxisomes, a classical Golgi apparatus, and canonical lysosomes. Giardia orthologues of mammalian lysosomal proteases function within an ER-like tubulovesicular compartment, which itself can dynamically communicate with clathrin-containing vacuoles at the periphery of the cell to receive endocytosed proteins. These primitive characteristics support Giardia's proposed early branching and could serve as a model to study the compartmentalization of endocytic and lysosomal functions into organelles distinct from the ER. This system also may have functional similarity to the retrograde transport of toxins and major histocompatibility complex class I function in the ER of mammals.