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UNC119 and PDE delta are lipid-binding proteins and are thought to form diffusible complexes with transducin-alpha and prenylated OS proteins, respectively, to mediate their trafficking to photoreceptor outer segments. Here, we investigate mechanisms of trafficking which are controlled by Arf-like protein 3 (Arl3), a small GTPase. The activity of ARL3 is regulated by a GEF (ARL13b) and a GAP (RP2). In a mouse germline knockout of RP2, ARL3-GTP is abundant as its intrinsic GTPase activity is extremely low. High levels of ARL3-GTP impair binding and trafficking of cargo to the outer segment. Germline knockout of ARL3 is embryonically lethal generating a syndromic ciliopathy-like phenotype. Retina-and rod-specific knockout of ARL3 allow to determine the precise mechanisms leading to photoreceptor degeneration. The knockouts reveal binary functions of ARL3-GTP as a key molecule in late-stage photoreceptor ciliogenesis and cargo displacement factor.