Mutations at a single locus, PKHD1, are responsible for causing human autosomal recessive polycystic kidney disease (ARPKD). Recent studies suggest that the cystic disease might result from defects in planar cell polarity, but how the 4074 amino acid ciliary protein encoded by the longest open reading frame of this transcriptionally complex gene may regulate this process is unknown. Using novel in vitro expression systems, we show that the PKHD1 gene product polyductin/fibrocystin undergoes a complicated pattern of Notch-like proteolytic processing. Cleavage at a probable proprotein convertase site produces a large extracellular domain that is tethered to the C-terminal stalk by disulfide bridges. This fragment is then shed from the primary cilium by activation of a member of the ADAM metalloproteinase disintegrins family, resulting in concomitant release of an intra-cellular C-terminal fragment via a gamma-secretase-dependent process. The ectodomain of endogenous PD1 is similarly shed from the primary cilium upon activation of sheddases. This is the first known example of this process involving a protein of the primary cilium and suggests a novel mechanism whereby proteins that localize to this structure may function as bi-directional signaling molecules. Regulated release from the primary cilium into the lumen may be a mechanism to distribute signal to down-stream targets using flow.