The yeast PROPPIN Atg18 folds as a β-propeller with two binding sites for phosphatidylinositol-3-phosphate (PtdIns3P) and PtdIns(3,5)P at its circumference. Membrane insertion of an amphipathic loop of Atg18 leads to membrane tubulation and fission. Atg18 has known functions at the PAS during macroautophagy, but the functional relevance of its endosomal and vacuolar pool is not well understood. Here we show in a proximity-dependent labeling approach and by co-immunoprecipitations that Atg18 interacts with Vps35, a central component of the retromer complex. The binding of Atg18 to Vps35 is competitive with the sorting nexin dimer Vps5 and Vps17. This suggests that Atg18 within the retromer can substitute for both the phosphoinositide binding and the membrane bending capabilities of these sorting nexins. Indeed, we found that Atg18-retromer is required for PtdIns(3,5)P-dependent vacuolar fragmentation during hyperosmotic stress. The Atg18-retromer is further involved in the normal sorting of the integral membrane protein Atg9. However, PtdIns3P-dependent macroautophagy and the selective cytoplasm-to-vacuole targeting (Cvt) pathway are only partially affected by the Atg18-retromer. We expect that this is due to the plasticity of the different sorting pathways within the endovacuolar system. BAR: bin/amphiphysin/Rvs; FOA: 5-fluoroorotic acid; PAS: phagophore assembly site; PROPPIN: beta-propeller that binds phosphoinositides; PtdIns3P: phosphatidylinositol-3-phosphate; PX: phox homology.