Endoplasmic reticulum (ER) degradation of aberrant proteins is mediated by the ubiquitin-proteasome pathway. Here, a membrane-bound component of the ubiquitin system, Cue1p, was identified. It was shown to recruit the soluble ubiquitin-conjugating enzyme Ubc7p to the ER membrane. In the absence of Cue1p, unassembled and thus cytosolically mislocalized Ubc7p was unable to participate in ER degradation or in the turnover of soluble non-ER proteins. Moreover, ubiquitination by Cue1p-assembled Ubc7p and Ubc6p was a prerequisite for retrograde transport of lumenal substrates out of the ER, which suggests that ubiquitination is mechanistically integrated into the ER degradation process.