Cytokinin receptors were shown recently to be localised mainly to the endoplasmic reticulum (ER); however, the activity of ER-located receptors was not proven. We have therefore tested the functionality of ER-located Arabidopsis receptors. The first step of cytokinin signal transduction is the transfer of a phosphoryl group from the activated receptor to a phosphotransfer protein. To determine the subcellular localisation of receptor-phosphotransmitter interaction in planta, BiFC experiments were performed. Receptors ARABIDOPSIS HISTIDINE KINASE 2 (AHK2), AHK3 and AHK4 (CRE1) and phosphotransmitters ARABIDOPSIS HISTIDINE-CONTAINING PHOSPHOTRANSMITTER 1 (AHP1), AHP2 and AHP3 fused to split-eYFP were transiently expressed in Nicotiana benthamiana leaves. Receptor-phosphotransmitter pairs were shown to interact in every possible combination in a pattern reflecting the ER. Receptor dimers, an active form of the receptors, were also detected in the ER. According to BiFC and protease protection data, the catalytic part of AHK3 was located in the cytoplasm whereas the hormone binding module faced the ER lumen. This topology is consistent with receptor signalling from the ER membrane. Finally, the functionality of receptors in different membrane fractions was tested using an in vitro kinase assay visualising the phosphorylation of phosphotransfer proteins. The detected cytokinin-dependent phosphotransfer activity was confined mainly to the ER-enriched fraction. Collectively, our data demonstrate that ER-located cytokinin receptors are active in cytokinin signal transduction. Hence, intracellular cytokinins appear to play an essential role in cytokinin signalling. An updated model for the spatial organisation of cytokinin transport form activation, intracellular trafficking and signalling from the ER is proposed.