Proper functioning of organelles necessitates efficient protein targeting to the appropriate subcellular locations. For example, degradation in the fungal vacuole relies on an array of targeting mechanisms for both resident hydrolases and their substrates. The particular processes that are used vary depending on the available nutrients. Under starvation conditions, macroautophagy is the primary method by which bulk cytosol is sequestered into autophagic vesicles (autophagosomes) destined for this organelle. Molecular genetic, morphological, and biochemical evidence indicates that macroautophagy shares much of the same cellular machinery as a biosynthetic pathway for the delivery of the vacuolar hydrolase, aminopeptidase I, via the cytoplasm-to-vacuole targeting (Cvt) pathway. The machinery required in both pathways includes a novel protein modification system involving the conjugation of two autophagy proteins, Apg12p and Apg5p. The conjugation reaction was demonstrated to be dependent on Apg7p, which shares homology with the E1 family of ubiquitin-activating enzymes. In this study, we demonstrate that Apg7p functions at the sequestration step in the formation of Cvt vesicles and autophagosomes. The subcellular localization of Apg7p fused to green fluorescent protein (GFP) indicates that a subpopulation of Apg7pGFP becomes membrane associated in an Apg12p-dependent manner. Subcellular fractionation experiments also indicate that a portion of the Apg7p pool is pelletable under starvation conditions. Finally, we demonstrate that the Pichia pastoris homologue Gsa7p that is required for peroxisome degradation is functionally similar to Apg7p, indicating that this novel conjugation system may represent a general nonclassical targeting mechanism that is conserved across species.