Abstract: Polarized cells frequently use diffusion barriers to separate plasma membrane domains. It is unknown whether diffusion barriers also compartmentalize intracellular organelles. We used photobleaching techniques to characterize protein diffusion in the yeast endoplasmic reticulum (ER). Although a soluble protein diffused rapidly throughout the ER lumen, diffusion of ER membrane proteins was restricted at the bud neck. Ultrastructural studies and fluorescence microscopy revealed the presence of a ring of smooth ER at the bud neck. This ER domain and the restriction of diffusion for ER membrane proteins through the bud neck depended on septin function. The membrane-associated protein Bud6 localized to the bud neck in a septin-dependent manner and was required to restrict the diffusion of ER membrane proteins. Our results indicate that Bud6 acts downstream of septins to assemble a fence in the ER membrane at the bud neck. Thus, in polarized yeast cells, diffusion barriers compartmentalize the ER and the plasma membrane along parallel lines.