Five endosomal sorting complexes required for transport (ESCRTs) mediate the degradation of ubiquitinated membrane proteins via multivesicular bodies (MVBs) in lysosomes. ESCRT-0, -I, and -II interact with cargo on endosomes. ESCRT-II also initiates the assembly of a ringlike ESCRT-III filament consisting of Vps20, Snf7, Vps24, and Vps2. The AAA-adenosine triphosphatase Vps4 disassembles and recycles the ESCRT-III complex, thereby terminating the ESCRT pathway. A mechanistic role for Vps4 in intraluminal vesicle (ILV) formation has been unclear. By combining yeast genetics, biochemistry, and electron tomography, we find that ESCRT-III assembly on endosomes is required to induce or stabilize the necks of growing MVB ILVs. Yet, ESCRT-III alone is not sufficient to complete ILV biogenesis. Rather, binding of Vps4 to ESCRT-III, coordinated by interactions with Vps2 and Snf7, is coupled to membrane neck constriction during ILV formation. Thus, Vps4 not only recycles ESCRT-III subunits but also cooperates with ESCRT-III to drive distinct membrane-remodeling steps, which lead to efficient membrane scission at the end of ILV biogenesis in vivo.