In yeast, the sorting of transmembrane proteins into the multivesicular body (MVB) internal vesicles requires their ubiquitylation by the ubiquitin ligase Rsp5. This allows their recognition by the ubiquitin-binding domains (UBDs) of several endosomal sorting complex required for transport (ESCRT) subunits. K63-linked ubiquitin (K63Ub) chains decorate several MVB cargoes, and accordingly we show that they localize prominently to the class E compartment, which accumulates ubiquitylated cargoes in cells lacking ESCRT components. Conversely, yeast cells unable to generate K63Ub chains displayed MVB sorting defects. These properties are conserved among eukaryotes, as the mammalian melanosomal MVB cargo MART-1 is modified by K63Ub chains and partly missorted when the genesis of these chains is inhibited. We show that all yeast UBD-containing ESCRT proteins undergo ubiquitylation and deubiquitylation, some being modified through the opposing activities of Rsp5 and the ubiquitin isopeptidase Ubp2, which are known to assemble and disassemble preferentially K63Ub chains, respectively. A failure to generate K63Ub chains in yeast leads to an MVB ultrastructure alteration. Our work thus unravels a double function of K63Ub chains in cargo sorting and MVB biogenesis.