The primary cilium localized G-protein-coupled receptor Gpr161 represses hedgehog pathway via cAMP signaling in multiple tissues. However, whether Gpr161 functions exclusively from inside cilia is unclear. Here, we generated ciliary localization-defective but cAMP signaling-competent Gpr161mut1 knock-in mice. We uncovered distinctive roles for subcellular Gpr161 pools, contingent upon dependence of the morpho-phenotypic spectrum on downstream Gli transcriptional regulators. Compared to Gpr161 knockout, gene dosage of the Gpr161mut1 allele caused delayed embryonic lethality, reduced upregulation of hedgehog targets and intermediate Gli3 repressor levels. Unlike Gpr161 knockout with aberrant ventral progenitor expansion in neural tube, extraciliary Gpr161 pools in Gpr161mut1 prevented Gli2 activator-mediated ventralization. However, limb buds and midfacial tissues that require Gli repressor for morphogenesis, showed polydactyly and midface widening in Gpr161mut1 from hyperactivation. Thus, Gpr161 ciliary and extraciliary pools functioned as rheostats preventing gradations of hedgehog pathway hyperactivation. Ciliary Gpr161 pools prevented tissue-specific phenotypes dependent specifically on reduced Gli repressor thresholds.