The early endosome comprises morphologically distinct regions specialised in sorting cargo receptors. A central question is whether receptors move through a predetermined structural pathway, or whether cargo selection contributes to the generation of endosome morphology and membrane flux. Here, we show that depletion of tumour susceptibility gene 101 impairs the selection of epidermal growth factor receptor away from recycling receptors within the limiting membrane of the early endosome. Consequently, epidermal growth factor receptor sorting to internal vesicles of the multivesicular body and cargo recycling to the cell surface or Golgi complex are inhibited. These defects are accompanied by disruption of bulk flow transport to the lysosome and profound structural rearrangement of the early endosome. The pattern of tubular and vacuolar domains is replaced by enlarged vacuoles, many of which are folded into multicisternal structures resembling the "Class E" compartments that define several Saccharomyces cerevisiae vacuolar protein sorting mutants. The cisternae are interleaved by a fine matrix but lack other surface elaborations, most notably clathrin.