Dynamic changes in membrane protein composition of the primary cilium are central to development and homeostasis, but we know little about mechanisms regulating membrane protein flux. Stimulation of the sonic hedgehog (Shh) pathway in vertebrates results in accumulation and activation of the effector Smoothened within cilia and concomitant disappearance of a negative regulator, the orphan G protein-coupled receptor (GPCR), Gpr161. Here, we describe a two-step process determining removal of Gpr161 from cilia. The first step involves β-arrestin recruitment by the signaling competent receptor, which is facilitated by the GPCR kinase Grk2. An essential factor here is the ciliary trafficking and activation of Smoothened, which by increasing Gpr161-β-arrestin binding promotes Gpr161 removal, both during resting conditions and upon Shh pathway activation. The second step involves clathrin-mediated endocytosis, which functions outside of the ciliary compartment in coordinating Gpr161 removal. Mechanisms determining dynamic compartmentalization of Gpr161 in cilia define a new paradigm for down-regulation of GPCRs during developmental signaling from a specialized subcellular compartment.

The orphan G protein-coupled receptor (GPCR) GPR161 plays a central role in development by suppressing Hedgehog signaling. The fundamental basis of how GPR161 is activated remains unclear. Here, we determined a cryogenic-electron microscopy structure of active human GPR161 bound to heterotrimeric Gs. This structure revealed an extracellular loop 2 that occupies the canonical GPCR orthosteric ligand pocket. Furthermore, a sterol that binds adjacent to transmembrane helices 6 and 7 stabilizes a GPR161 conformation required for Gs coupling. Mutations that prevent sterol binding to GPR161 suppress Gs-mediated signaling. These mutants retain the ability to suppress GLI2 transcription factor accumulation in primary cilia, a key function of ciliary GPR161. By contrast, a protein kinase A-binding site in the GPR161 C terminus is critical in suppressing GLI2 ciliary accumulation. Our work highlights how structural features of GPR161 interface with the Hedgehog pathway and sets a foundation to understand the role of GPR161 function in other signaling pathways.