Probable core component of the endosomal sorting required for transport complex III (ESCRT-III) which is involved in multivesicular bodies (MVBs) formation and sorting of endosomal cargo proteins into MVBs. MVBs contain intraluminal vesicles (ILVs) that are generated by invagination and scission from the limiting membrane of the endosome and mostly are delivered to lysosomes enabling degradation of membrane proteins, such as stimulated growth factor receptors, lysosomal enzymes and lipids. The MVB pathway appears to require the sequential function of ESCRT-O, -I,-II and -III complexes. ESCRT-III proteins mostly dissociate from the invaginating membrane before the ILV is released. The ESCRT machinery also functions in topologically equivalent membrane fission events, such as the terminal stages of cytokinesis and the budding of enveloped viruses (HIV-1 and other lentiviruses). ESCRT-III proteins are believed to mediate the necessary vesicle extrusion and/or membrane fission activities, possibly in conjunction with the AAA ATPase VPS4. Selectively binds to phosphatidylinositol 3,5-bisphosphate PtdIns(3,5)P2 and PtdIns(3,4)P2 in preference to other phosphoinositides tested. Involved in late stages of cytokinesis. Plays a role in endosomal sorting/trafficking of EGF receptor. Isoform 2 prevents stress-mediated cell death and accumulation of reactive oxygen species when expressed in yeast cells. {ECO:0000269|PubMed:14505570, ECO:0000269|PubMed:15707591, ECO:0000269|PubMed:16740483, ECO:0000269|PubMed:17331679, ECO:0000269|PubMed:18076377}. This is the function of CHMP3 (charged multivesicular body protein 3, Ensembl gene identifier ENSG00000115561).