Characterization of previously described intraflagellar transport (IFT) mouse mutants has led to the proposition that normal primary cilia are required for mammalian cells to respond to the sonic hedgehog (SHH) signal. Here we describe an N-ethyl-N-nitrosourea-induced mutant mouse, alien (aln), which has abnormal primary cilia and shows overactivation of the SHH pathway. The aln locus encodes a novel protein, THM1 (tetratricopeptide repeat-containing hedgehog modulator-1), which localizes to cilia. aln-mutant cilia have bulb-like structures at their tips in which IFT proteins (such as IFT88) are sequestered, characteristic of Chlamydomonas reinhardtii and Caenorhabditis elegans retrograde IFT mutants. RNA-interference knockdown of Ttc21b (which we call Thm1 and which encodes THM1) in mouse inner medullary collecting duct cells expressing an IFT88-enhanced yellow fluorescent protein fusion recapitulated the aln-mutant cilial phenotype, and live imaging of these cells revealed impaired retrograde IFT. In contrast to previously described IFT mutants, Smoothened and full-length glioblastoma (GLI) proteins localize to aln-mutant cilia. We hypothesize that the aln retrograde IFT defect causes sequestration of IFT proteins in aln-mutant cilia and leads to the overactivated SHH signaling phenotype. Specifically, the aln mutation uncouples the roles of anterograde and retrograde transport in SHH signaling, suggesting that anterograde IFT is required for GLI activation and that retrograde IFT modulates this event.