Mechanisms coordinating endosomal degradation and recycling are poorly understood, as are the cellular roles of microtubule (MT) severing. We show that cells lacking the MT-severing protein spastin had increased tubulation of and defective receptor sorting through endosomal tubular recycling compartments. Spastin required the ability to sever MTs and to interact with ESCRT-III (a complex controlling cargo degradation) proteins to regulate endosomal tubulation. Cells lacking IST1 (increased sodium tolerance 1), an endosomal sorting complex required for transport (ESCRT) component to which spastin binds, also had increased endosomal tubulation. Our results suggest that inclusion of IST1 into the ESCRT complex allows recruitment of spastin to promote fission of recycling tubules from the endosome. Thus, we reveal a novel cellular role for MT severing and identify a mechanism by which endosomal recycling can be coordinated with the degradative machinery. Spastin is mutated in the axonopathy hereditary spastic paraplegia. Zebrafish spinal motor axons depleted of spastin or IST1 also had abnormal endosomal tubulation, so we propose this phenotype is important for axonal degeneration.