Receptor downregulation in the MVB pathway is mediated by the ESCRT complexes. ESCRT-III is composed of four protein subunits that are monomeric in the cytosol and oligomerize into a protein lattice only upon membrane binding. Recent studies have shown that the ESCRT-III protein Snf7 can form a filament by undergoing homo-oligomerization. To examine the role of membrane binding and of interactions with other ESCRT components in initiating Snf7 oligomerization, we used fluorescence spectroscopy to directly detect and characterize the assembly of the Snf7 oligomer on liposomes using purified ESCRT components. The observed fluorescence changes reveal an obligatory sequence of membrane-protein and protein-protein interactions that generate the active conformation of Snf7. Also, we demonstrate that ESCRT-III assembly drives membrane deformation. Furthermore, using an in vitro disassembly assay, we directly demonstrate that Vps24 and Vps2 function as adaptors in the ATP-dependent membrane disassembly of the ESCRT-III complex by recruiting the AAA ATPase Vps4.