Autophagy is a catabolic process that delivers cytoplasmic material to the lysosome for degradation. The mechanisms regulating autophagosome formation and size remain unclear. Here, we show that autophagosome formation was triggered by the overexpression of a dominant-negative inactive mutant of Myotubularin-related phosphatase 3 (MTMR3). Mutant MTMR3 partially localized to autophagosomes, and PtdIns3P and two autophagy-related PtdIns3P-binding proteins, GFP-DFCP1 and GFP-WIPI-1alpha (WIPI49/Atg18), accumulated at sites of autophagosome formation. Knock-down of MTMR3 increased autophagosome formation, and overexpression of wild-type MTMR3 led to significantly smaller nascent autophagosomes and a net reduction in autophagic activity. These results indicate that autophagy initiation depends on the balance between PI 3-kinase and PI 3-phosphatase activity. Local levels of PtdIns3P at the site of autophagosome formation determine autophagy initiation and the size of the autophagosome membrane structure.