Regulation of the Hedgehog (Hh) pathway relies on an interaction of two receptors. In the absence of Hh, Patched1 (Ptch1) inhibits the pathway. Binding of the ligand Hh to Ptch1 stimulates the localization of the activating receptor Smoothened (Smo) to the primary cilium, which is required for the transcriptional Hh response. Hh can also induce chemotaxis through a nontranscriptional pathway. We assessed the effects of defective ciliary localization of Smo on its subcellular trafficking and ability to mediate chemotactic signaling. Cells expressing mutants of Smo that could not localize to the primary cilium or cells lacking the primary cilium showed altered intracellular trafficking of Smo and, in response to Hh or Smo agonists, decreased transcriptional signaling and enhanced chemotactic responsiveness. Thus, the ciliary localization machinery appears to transport Smo to subcellular sites where it can mediate transcriptional signaling and away from locations where it can mediate chemotactic signaling. The subcellular localization of Smo is thus a crucial determinant of its signaling characteristics and implies the existence of a pool of Smo dedicated to chemotaxis.