The nonclassical MHC class I-related (MHC-I) molecule HFE controls cellular iron homeostasis by a mechanism that has not been fully elucidated. We examined the regulation of HFE by K5, the E3 ubiquitin ligase encoded by Kaposi's sarcoma-associated herpesvirus (KSHV/HHV8), that is known to down-regulate classical MHC-I. K5 down-regulated HFE efficiently, using polyubiquitination of the membrane proximal lysine in the HFE cytoplasmic tail (K331), to target the molecule for degradation via ESCRT1/TSG101-dependent sorting from endosomes to multivesicular bodies (MVBs)/lysosomes. In the primary effusion lymphoma cell line BC-3, which carries latent KSHV, HFE was degraded rapidly upon virus reactivation. HFE was ubiquitinated on lysine-331 in unactivated BC-3 cells, conditions where K5 was not detectable, consistent with an endogenous E3 ubiquitin ligase controlling HFE expression. The results show regulated expression of HFE by ubiquitination, consistent with a role in cellular iron homeostasis, a molecular mechanism targeted by KSHV to achieve a positive iron balance.