Human Nedd4 ubiquitin ligase, or its variants, inhibit yeast cell growth by disturbing the actin cytoskeleton organization and dynamics, and lead to an increase in levels of ubiquitinated proteins. In a screen for multicopy suppressors which rescue growth of yeast cells producing Nedd4 ligase with an inactive WW4 domain (Nedd4w4), we identified a fragment of ATG2 gene encoding part of the Atg2 core autophagy protein. Expression of the Atg2-C1 fragment (aa 1074-1447) improved growth, actin cytoskeleton organization, but did not significantly change the levels of ubiquitinated proteins in these cells. The GFP-Atg2-C1 protein in Nedd4w4-producing cells primarily localized to a single defined structure adjacent to the vacuole, surrounded by an actin filament ring, containing Hsp42 and Hsp104 chaperones. This localization was not affected in several atg deletion mutants, suggesting that it might be distinct from the phagophore assembly site (PAS). However, deletion of ATG18 encoding a phosphatidylinositol-3-phosphate (PI3P)-binding protein affected the morphology of the GFP-Atg2-C1 structure while deletion of ATG14 encoding a subunit of PI3 kinase suppressed toxicity of Nedd4w4 independently of GFP-Atg2-C1. Further analysis of the Atg2-C1 revealed that it contains an APT1 domain of previously uncharacterized function. Most importantly, we showed that this domain is able to bind phosphatidylinositol phosphates, especially PI3P, which is abundant in the PAS and endosomes. Together our results suggest that human Nedd4 ubiquitinates proteins in yeast and causes proteotoxic stress and, with some Atg proteins, leads to formation of a perivacuolar structure, which may be involved in sequestration, aggregation or degradation of proteins.