Ferroportin exports iron into plasma from absorptive enterocytes, erythrophagocytosing macrophages, and hepatic stores. The hormone hepcidin controls cellular iron export and plasma iron concentrations by binding to ferroportin and causing its internalization and degradation. We explored the mechanism of hepcidin-induced endocytosis of ferroportin, the key molecular event in systemic iron homeostasis. Hepcidin binding caused rapid ubiquitination of ferroportin in cell lines overexpressing ferroportin and in murine bone marrow-derived macrophages. No hepcidin-dependent ubiquitination was observed in C326S ferroportin mutant which does not bind hepcidin. Substitutions of lysines between residues 229 and 269 in the third cytoplasmic loop of ferroportin prevented hepcidin-dependent ubiquitination and endocytosis of ferroportin, and promoted cellular iron export even in the presence of hepcidin. The human ferroportin mutation K240E, previously associated with clinical iron overload, caused hepcidin resistance in vitro by interfering with ferroportin ubiquitination. Our study demonstrates that ubiquitination is the functionally relevant signal for hepcidin-induced ferroportin endocytosis.