Pay mutants of the yeast Yarrowia lipolytica fail to assemble functional peroxisomes. One mutant strain, pay5-1, lacks normal peroxisomes and instead contains irregular vesicular structures surrounded by multiple unit membranes. The pay5-1 mutant is not totally deficient in peroxisomal matrix protein targeting, as a subset of matrix proteins continues to localize to a subcellular fraction enriched for peroxisomes. The functionally complementing gene PAYS encodes a protein, Pay5p, of 380 amino acids (41,720 Da). Pay5p is a peroxisomal integral membrane protein homologous to mammalian PAF-1 proteins, which are essential for peroxisome assembly and whose mutation in humans results in Zellweger syndrome. Pay5p is targeted to mammalian peroxisomes, demonstrating the evolutionary conservation of the targeting mechanism for peroxisomal membrane proteins. Our results suggest that in pay5 mutants, normal peroxisome assembly is blocked, which leads to the accumulation of the membranous vesicular structures observed.