The plant signaling molecule auxin provides positional and directional information in a wide variety of developmental processes via its differential distribution (gradients) within plant tissues1. Thus cellular auxin levels often decide about the developmental output of auxin signaling. Conceptually, transmembrane transport and metabolic processes regulate the steady-state levels of auxin in any given cell2. In particular, PIN auxin efflux carrier-mediated, directional auxin transport between cells is crucial for generating intercellular auxin distribution3. Here we show that Arabidopsis thaliana PIN5, - an atypical member of the PIN gene family encodes a functional auxin transporter that is required for auxin-mediated development but does not play a direct role in cell-to-cell transport. Instead, PIN5 is an important factor in controlling intracellular auxin homeostasis and metabolism. PIN5 localizes, unlike other characterized plasma membrane PIN proteins, to endoplasmatic reticulum (ER) presumably mediating auxin flow from the cytosol to the lumen of ER. The ER localization of other PIN5-like transporters including the moss PIN suggests that the diversification of PIN protein functions in mediating auxin homeostasis and cell-to-cell auxin transport represents an ancient event during the evolution of land plants. Sequence manipulation revealed that PIN functional diversification could have been realized by a small sequence modification in conserved residues leading to a change in subcellular protein sorting. Our data identified an additional mode of regulating homeostasis of a plant hormone by its subcellular compartmentalization and provide insights into evolution of mechanisms controlling auxin homeostasis and transport.