In animal cells, the primary cilium transduces extracellular signals through signaling receptors localized in the ciliary membrane, but how these ciliary membrane proteins are retained in the cilium is unknown. We found that ciliary membrane proteins were highly mobile, but their diffusion was impeded at the base of the cilium by a diffusion barrier. Septin 2 (SEPT2), a member of the septin family of guanosine triphosphatases that form a diffusion barrier in budding yeast, localized at the base of the ciliary membrane. SEPT2 depletion resulted in loss of ciliary membrane protein localization and Sonic hedgehog signal transduction, and inhibited ciliogenesis. Thus, SEPT2 is part of a diffusion barrier at the base of the ciliary membrane and is essential for retaining receptor-signaling pathways in the primary cilium.