GABAB (gamma-aminobutyric acid, type B) is a heterodimeric G-protein-coupled receptor. The GABAB1 subunit, which contains an endoplasmic reticulum retention sequence, is only transported to the cell surface when it is associated with the GABAB2 subunit. Fluorescence recovery after photobleaching studies in transfected COS-7 cells and hippocampal neurons revealed that GABAB2 diffuses slowly within the plasma membrane whether expressed alone or with the GABAB1 subunit. Treatment of cells with brefeldin A revealed that GABAB2 moves freely within the endoplasmic reticulum, suggesting that slow movement of GABAB2 is a result of its plasma membrane insertion. Disruption of the cytoskeleton did not affect the mobility of GABAB2, indicating that its restricted diffusion is not due to direct interactions with actin or tubulin. To determine whether the C terminus of GABAB2 regulates its diffusion, this region of the subunit was attached to the lymphocyte membrane protein, CD2, which then exhibited a slower rate of lateral diffusion. Furthermore, co-expression of a cytoplasmically expressed soluble form of the GABAB2 C terminus increased movement of the GABAB2 subunit. We constructed forms of GABAB2 with various C-terminal truncations. Truncation of GABAB2 after residue 862, but not residue 886, caused a dramatic increase in its mobility, suggesting that the region between these two residues is critical for restricting GABAB2 diffusion. Finally, we investigated whether activation of GABAB might modulate its movement. Treatment of COS-7 cells with the GABAB receptor agonist baclofen significantly increased its mobile fraction. These data show that the restricted movement of GABAB at the cell surface is regulated by a region within its C terminus.