Autophagy is a dynamic membrane phenomenon for bulk protein degradation in the lysosome/vacuole^,. Apg8/Aut7 is an essential factor for autophagy in yeast^,,. We previously found that the carboxy-terminal arginine of nascent Apg8 is removed by Apg4/Aut2 protease, leaving a glycine residue at the C terminus. Apg8 is then converted to a form (Apg8-X) that is tightly bound to the membrane. Here we report a new mode of protein lipidation. Apg8 is covalently conjugated to phosphatidylethanolamine through an amide bond between the C-terminal glycine and the amino group of phosphatidylethanolamine. This lipidation is mediated by a ubiquitination-like system. Apg8 is a ubiquitin-like protein that is activated by an E1 protein, Apg7 (refs , ), and is transferred subsequently to the E2 enzymes Apg3/Aut1 (ref. ). Apg7 activates two different ubiquitin-like proteins, Apg12 (ref. ) and Apg8, and assigns them to specific E2 enzymes, Apg10 (ref. ) and Apg3, respectively. These reactions are necessary for the formation of Apg8-phosphatidylethanolamine. This lipidation has an essential role in membrane dynamics during autophagy.