The retromer complex is a conserved cytoplasmic coat complex that mediates the endosome-to-Golgi retrieval of vacuole/lysosome hydrolase receptors in yeast and mammals. The recognition of cargo proteins by the retromer is performed by the Vps35p/VPS35 (where Vps is vacuolar protein sorting) component, which together with Vps26p/VPS26 and Vps29p/VPS29, forms the cargo-selective subcomplex. In this report, we have identified a highly-conserved region of Vps35p/VPS35 that is essential for the interaction with Vps26p/VPS26 and for assembly of the retromer complex. Mutation of residues within the conserved region results in Vps35p/VPS35 mutants, which cannot bind to Vps26p/VPS26 and are not efficiently targeted to the endosomal membrane. These data implicate Vps26p/VPS26 in regulating Vps35p/VPS35 membrane association and therefore suggest a role for Vps26p/VPS26 in cargo recognition.