Spatially separated apical and basolateral plasma membrane domains that have distinct functions and molecular compositions are a characteristic feature of epithelial cell polarity. The subapical compartment (SAC), also known as the common endosome (CE), where endocytic pathways from both surfaces merge, plays a crucial role in the maintenance and probably the biogenesis of these distinct membrane domains. Although differences in morphology are apparent, the same principal features of a SAC can be distinguished in different types of epithelial cells. As polarity develops, the compartment acquires several distinct machineries that, in conjunction with the cytoskeleton, are necessary for polarized trafficking. Disrupting trafficking via the SAC and hence bypassing its sorting machinery, as occurs upon actin depolymerization, leads to mis-sorting of apical and basolateral molecules, thereby compromising the development of polarity. The structural and functional integrity of the compartment in part depends on microtubules. Moreover, the acquisition of a particular set of Rab proteins, including Rab11 and Rab3, appears to be crucial in regulating molecular sorting and vesicular transport relevant both to recycling to either plasma membrane domain and to de novo assembly of the apical domain. Furthermore, subcompartmentalization of the SAC appears to be key to its various functions.