Phosphatidylinositol 3-kinase (PI3K) regulates several vital cellular processes, including signal transduction and membrane trafficking. In order to study the intracellular localization of the PI3K product, phosphatidylinositol 3-phosphate [PI (3) P], we constructed a probe consisting of two PI (3) P-binding FYVE domains. The probe was found to bind specifically, and with high affinity, to PI (3) P both in vitro and in vivo. When expressed in fibroblasts, a tagged probe localized to endosomes, as detected by fluorescence microscopy. Electron microscopy of untransfected fibroblasts showed that PI (3) P is highly enriched on early endosomes and in the internal vesicles of multivesicular endosomes. While yeast cells deficient in PI3K activity (vps15 and vps34 mutants) were not labelled, PI (3) P was found on intralumenal vesicles of endosomes and vacuoles of wild-type yeast. vps27Δ yeast cells, which have impaired endosome to vacuole trafficking, showed a decreased vacuolar labelling and increased endosome labelling. Thus PI (3) P follows a conserved intralumenal degradation pathway, and its generation, accessibility and turnover are likely to play a crucial role in defining the early endosome and the subsequent steps leading to multivesicular endosome formation.