The secretory and endocytic pathways within higher cells consist of multiple membrane-bound compartments, each with a characteristic composition, through which proteins move on their way to or from the cell surface. Sorting of proteins within this system is achieved by their selective incorporation into budding vesicles and the specific fusion of these with an appropriate target membrane. Cytosolic coat proteins help to select vesicle contents, while fusion is mediated by membrane proteins termed SNAREs present in both vesicles and target membranes. SNAREs are not the sole determinants of target specificity, but they lie at the heart of the fusion process. The complete set of SNAREs is known in yeast, and analysis of their locations, interactions and functions in vivo gives a comprehensive picture of the traffic routes and the ways in which organelles such as the Golgi apparatus are formed. The principles of protein and lipid sorting revealed by this analysis are likely to apply to a wide variety of eukaryotic cells. The 1999 Croonian Lecture held at Imperial College, London on 28 January 1999.