The endocytic and secretory pathways of eukaryotic cells consist of an array of membrane-bound compartments, each of which contains a characteristic cohort of transmembrane proteins. Understanding how these proteins are targeted to and maintained within their appropriate compartments will be crucial for unravelling the mysteries of organelle biogenesis and function. A common event in the sorting of many transmembrane proteins is the interaction between a sorting signal in the cytosolic domain of the targeted protein and a component of an organellar protein coat. Here, we summarize recent findings on the mechanism of sorting by one type of signal, characterized by the presence of a critical tyrosine (Y) residue, and attempt to integrate these findings into a hypothetical model for protein sorting in the endocytic and late (post-Golgi) secretory pathways.