Mammalian Toll-like receptors (TLRs) 3, 7, 8 and 9 initiate immune responses to infection by recognizing microbial nucleic acids1,2; however, these responses come at the cost of potential autoimmunity owing to inappropriate recognition of self nucleic acids3. The localization of TLR9 and TLR7 to intracellular compartments seems to have a role in facilitating responses to viral nucleic acids while maintaining tolerance to self nucleic acids, yet the cell biology regulating the transport and localization of these receptors remains poorly understood4-6. Here we define the route by which TLR9 and TLR7 exit the endoplasmic reticulum and travel to endolysosomes in mouse macrophages and dendritic cells. The ectodomains of TLR9 and TLR7 are cleaved in the endolysosome, such that no full-length protein is detectable in the compartment where ligand is recognized. Notably, although both the full-length and cleaved forms of TLR9 are capable of binding ligand, only the processed form recruits MyD88 on activation, indicating that this truncated receptor, rather than the full-length form, is functional. Furthermore, conditions that prevent receptor proteolysis, including forced TLR9 surface localization, render the receptor non-functional. We propose that ectodomain cleavage represents a strategy to restrict receptor activation to endolysosomal compartments and prevent TLRs from responding to self nucleic acids.