The degradation and sorting of cytoplasmic and cell-surface proteins are crucial steps in the control of cellular functions. We previously identified three mammalian Vps (vacuolar protein sorting) proteins, Hrs (hepatocyte growth factor-regulated tyrosine kinase substrate) and signal transducing adaptor molecule (STAM) 1 and -2, which are tyrosine-phosphorylated upon cytokine/growth factor stimulation. Hrs and the STAMs each contain a ubiquitin-interacting motif and through formation of a complex are involved in the vesicle transport of early endosomes. To explore the mechanism and cellular function of this complex in mammalian cells, we established an Hrs-defective fibroblastoid cell line (hrs(-/-)); embryos with this genotype died in utero. In the hrs(-/-) cells only trace amounts of STAM1 and STAM2 were detected. Introduction of wild-type Hrs or an Hrs mutant with an intact STAM binding domain (Hrs-dFYVE) fully restored STAM1 and STAM2 expression, whereas mutants with no STAM binding ability (Hrs-dC2, Hrs-dM) failed to express the STAMs. This regulated control of STAM expression by Hrs was independent of transcription. Interestingly, STAM1 degradation was mediated by proteasomes and was partially dependent on the ubiquitin-interacting motif of STAM1. Revertant Hrs expression in hrs(-/-) cells not only led to the accumulation of ubiquitinated proteins, including intracytoplasmic vesicles, but also restored STAM1 levels in early endosomes and eliminated the enlarged endosome phenotype caused by the absence of Hrs. These results suggest that Hrs is a master molecule that controls in part the degradation of STAM1 and the accumulation of ubiquitinated proteins.