Formation of the autophagosome is likely the most complex step of macroautophagy, and indeed it is the morphological and functional hallmark of this process; accordingly, it is critical to understand the corresponding molecular mechanism. Atg8 is the only known autophagy-related (Atg) protein required for autophagosome formation that remains associated with the completed sequestering vesicle. Approximately one-fourth of all of the characterized Atg proteins that participate in autophagosome biogenesis affect Atg8, regulating its conjugation to phosphatidylethanolamine (PE), localization to the phagophore assembly site and/or subsequent deconjugation. An unanswered question in the field regards the physiological role of the deconjugation of Atg8–PE. Using an Atg8 mutant that bypasses the initial Atg4-dependent processing, we demonstrate that Atg8 deconjugation is an important step required to facilitate multiple events during macroautophagy. The inability to deconjugate Atg8–PE results in the mislocalization of this protein to the vacuolar membrane. We also show that the deconjugation of Atg8–PE is required for efficient autophagosome biogenesis, the assembly of Atg9-containing tubulovesicular clusters into phagophores/autophagosomes, and for the disassembly of PAS-associated Atg components.