Kainate receptors (KARs) are mediators of excitatory neurotransmission in the mammalian central nervous system, and their efficient targeting and trafficking is critical for normal synaptic function. A key step in the delivery of KARs to the neuronal plasma membrane is the exit of newly assembled receptors from the endoplasmic reticulum (ER). Here we report the identification of a novel ER retention signal in the alternatively spliced C-terminal domain of the GluR5-2b subunit, which controls receptor trafficking in both heterologous cells and neurons. The ER retention motif consists of a critical arginine (Arg-896) and surrounding amino acids, disruption of which promotes ER exit and surface expression of the receptors, as well as altering their physiological properties. The Arg-896-mediated ER retention of GluR5 is regulated by a mutation that mimics phosphorylation of Thr-898, but not by PDZ interactions. Furthermore, two positively charged residues (Arg-900 and Lys-901) in the C terminus were also found to regulate ER export of the receptors. Taken together, our results identify novel trafficking signals in the C-terminal domain of GluR5-2b and demonstrate that alternative splicing is an important mechanism regulating KAR function.