The Golgi/endosome-associated Vps34 phosphatidylinositol 3-kinase is essential for the sorting of hydrolases from the Golgi to the vacuole/lysosome. Upon inactivation of a temperature-conditional Vps34 kinase, cellular levels of PtdIns(3)P rapidly decrease and it has been proposed that this decrease is due to the continued turnover of PtdIns(3)P by cytoplasmic phosphatases. Here we show that mutations in VAM3 (vacuolar t-SNARE) and YPT7 (rab GTPase), which are required to direct protein and membrane delivery from prevacuolar endosomal compartments to the vacuole, dramatically increase/stabilize PtdIns(3)P levels in vivo by disrupting its turnover. We find that the majority of the total pool of PtdIns(3)P which has been synthesized, but not PtdIns(4)P, requires transport to the vacuole in order to be turned over. Unexpectedly, strains with impaired vacuolar hydrolase activity accumulate 4- to 5-fold higher PtdIns(3)P levels than wild-type cells, suggesting that lumenal vacuolar lipase and/or phosphatase activities degrade PtdIns(3)P. Because vacuolar hydrolases act in the lumen, PtdIns(3)P is likely to be transferred from the cytoplasmic membrane leaflet where it is synthesized, to the lumen of the vacuole. Interestingly, mutants that stabilize PtdIns(3)P accumulate small uniformly-sized vesicles (40-50 nm) within prevacuolar endosomes (multivesicular bodies) or the vacuole lumen. Based on these and other observations, we propose that PtdIns(3)P is degraded by an unexpected mechanism which involves the sorting of PtdIns(3)P into vesicles generated by invagination of the limiting membrane of the endosome or vacuole, ultimately delivering the phosphoinositide into the lumen of the compartment where it can be degraded by the resident hydrolases.