Mutations in genes that encode polycystins 1 or 2 cause polycystic kidney disease (PKD). Here, we report the genomic organization and functional expression of murine orthologue of human polycystin-2L1 (PKD2L1). The murine PKD2L1 gene comprises 15 exons in chromosome 19C3. Coexpression of PKD2L1 together with polycystin-1 (PKD1) resulted in the expression of PKD2L1 channels on the cell surface, whereas PKD2L1 expressed alone was retained within the endoplasmic reticulum (ER). This suggested that interaction between PKD1 and PKD2L1 is essential for PKD2L1 trafficking and channel formation. Deletion analysis at the cytoplasmic tail of PKD2L1 revealed that the coiled-coil domain was important for trafficking by PKD1. Mutagenesis within two newly identified ER retention signal-like amino acid sequences caused PKD2L1 to be expressed at the cell surface. This indicated that the coiled-coil domain was responsible for retaining PKD2L1 within the ER. Functional analysis of murine PKD2L1 expressed in HEK 293 cells was undertaken using calcium imaging. Coexpression of PKD1 and PKD2L1 resulted in the formation of functional cation channels that were opened by hypo-osmotic stimulation, whereas neither molecule formed functional channels when expressed alone. We conclude that PKD2L1 forms functional cation channels on the plasma membrane by interacting with PKD1. These findings raise the possibility that PKD2L1 represents the third genetic locus that is responsible for PKD.