C. elegans first stage (L1) larvae hatched in the absence of food, arrest development and enter an L1 diapause, whereby they can survive starvation for several weeks. The physiological and metabolic requirements for survival during L1 diapause are poorly understood. However, yolk, a cholesterol binding/transport protein, has been suggested to serve as an energy source. Here, we demonstrate that C. elegans TBC-2, a RAB-5 GTPase Activating Protein (GAP) involved in early-to-late endosome transition, is important for yolk protein storage during embryogenesis and for L1 survival during starvation. We found during embryogenesis, that a yolk::green fluorescent protein fusion (YP170::GFP), disappeared much more quickly in tbc-2 mutant embryos as compared with wild-type control embryos. The premature disappearance of YP170::GFP in tbc-2 mutants is likely due to premature degradation in the lysosomes as we found that YP170::GFP showed increased colocalization with Lysotracker Red, a marker for acidic compartments. Furthermore, YP170::GFP disappearance in tbc-2 mutants required RAB-7, a regulator of endosome to lysosome trafficking. Although tbc-2 is not essential in fed animals, we discovered that tbc-2 mutant L1 larvae have strongly reduced survival when hatched in the absence of food. We show that tbc-2 mutant larvae are not defective in maintaining L1 diapause and that mutants defective in yolk uptake, rme-1 and rme-6, also had strongly reduced L1 survival when hatched in the absence of food. Our findings demonstrate that TBC-2 is required for yolk protein storage during embryonic development and provide strong correlative data indicating that yolk constitutes an important energy source for larval survival during L1 diapause.