Microautophagy is the transfer of cytosolic components into the lysosome by direct invagination of the lysosomal membrane and subsequent budding of vesicles into the lysosomal lumen. This process is topologically equivalent to membrane invagination during multivesicular body formation and to the budding of enveloped viruses. Vacuoles are lysosomal compartments of yeasts. Vacuolar membrane invagination can be reconstituted in vitro with purified yeast vacuoles, serving as a model system for budding of vesicles into the lumen of an organelle. Using this in vitro system, we defined different reaction states. We identified inhibitors of microautophagy in vitro and used them as tools for kinetic analysis. This allowed us to characterize four biochemically distinguishable steps of the reaction. We propose that these correspond to sequential stages of vacuole invagination and vesicle scission. Formation of vacuolar invaginations was slow and temperature-dependent, whereas the final scission of the vesicle from a preformed invagination was fast and proceeded even on ice. Our observations suggest that the formation of invaginations rather than the scission of vesicles is the rate-limiting step of the overall reaction.