bicoidmessenger RNA localizes to the anterior of theDrosophilaegg, where it is translated to form a morphogen gradient of Bicoid protein that patterns the head and thorax of the embryo. Althoughbicoidwas the first localized cytoplasmic determinant to be identified1-4, little is known about how the mRNA is coupled to the microtubule-dependent transport pathway that targets it to the anterior, and it has been proposed that the mRNA is recognized by a complex of many redundant proteins, each of which binds to the localization element in the 3′ untranslated region (UTR) with little or no specificity5. Indeed, the only known RNA-binding protein that co-localizes withbicoidmRNA is Staufen, which binds non-specifically to double-stranded RNAin vitro6,7. Here we show that mutants in all subunits of the ESCRT-II complex (VPS22, VPS25 and VPS36) abolish the final Staufen-dependent step inbicoidmRNA localization. ESCRT-II is a highly conserved component of the pathway that sorts ubiquitinated endosomal proteins into internal vesicles8,9, and functions as a tumour-suppressor by removing activated receptors from the cytoplasm10,11. However, the role of ESCRT-II inbicoidlocalization seems to be independent of endosomal sorting, because mutations in ESCRT-I and III components do not affect the targeting ofbicoidmRNA. Instead, VPS36 functions by binding directly and specifically to stem-loop V of thebicoid3′ UTR through its amino-terminal GLUE domain12, making it the first example of a sequence-specific RNA-binding protein that recognizes thebicoidlocalization signal. Furthermore, VPS36 localizes to the anterior of the oocyte in abicoid-mRNA-dependent manner, and is required for the subsequent recruitment of Staufen to thebicoidcomplex. This function of ESCRT-II as an RNA-binding complex is conserved in vertebrates and may clarify some of its roles that are independent of endosomal sorting.