Although cellular proteins conjugated to K48-linked Ub chains are targeted to proteasomes, proteins conjugated to K63-ubiquitin chains are directed to lysosomes. However, pure 26S proteasomes bind and degrade K48- and K63-ubiquitinated substrates similarly. Therefore, we investigated why K63-ubiquitinated proteins are not degraded by proteasomes. We show that mammalian cells contain soluble factors that selectively bind to K63 chains and inhibit or prevent their association with proteasomes. Using ubiquitinated proteins as affinity ligands, we found that the main cellular proteins that associate selectively with K63 chains and block their binding to proteasomes are ESCRT0 (Endosomal Sorting Complex Required for Transport) and its components, STAM and Hrs. In vivo, knockdown of ESCRT0 confirmed that it is required to block binding of K63-ubiquitinated molecules to the proteasome. In addition, the Rad23 proteins, especially hHR23B, were found to bind specifically to K48-ubiquitinated proteins and to stimulate proteasome binding. The specificities of these proteins for K48- or K63-ubiquitin chains determine whether a ubiquitinated protein is targeted for proteasomal degradation or delivered instead to the endosomal-lysosomal pathway.