To study the fusion and separation of endocytic compartments, we have used digital image analysis to quantify the accumulation of fluorescent ligands in endosomes during continuous endocytosis for periods of 1-20 min. Fluorescently labeled transferrin (Tf) and low density lipoproteins (LDL) were used as markers of recycling receptors and lysosomally directed ligands respectively. By measuring the intensity of individual endosomes, we found that the amount of LDL per endosome increases 30-40-fold between 1 and 10 min and then plateaus. In contrast, the amount of Tf per endosome reaches a steady state within 2 min at a level that is only three to four times that at 1 min. We used pulse-chase double label methods to demonstrate that Tf cycles through the compartment in which the LDL accumulates. When both Tf and LDL are added to cells simultaneously for 2 min, nearly all endosomes contain both labels. With 2-4 min further incubation in the absence of external ligands, LDL-containing compartments become depleted of Tf as Tf is directed to para-Golgi recycling endosomes. However, if Tf is added to the medium 2-4 min after a pulse with LDL, most of the LDL-containing endosomes become labeled with Tf. The data indicate that at least 30-40 endocytic vesicles containing both Tf and LDL fuse with an endosomal compartment over a period of 5-10 min. LDL accumulates within this compartment and Tf is simultaneously removed. Simple mathematical models suggest that this type of iterative fractionation can lead to very high efficiency sorting.