Background: Multiple intracellular transport pathways drive the formation, maintenance, and function of cilia, a compartmentalized organelle associated with motility, chemo-/mechano-/photosensation, and developmental signaling. These pathways include cilium-based intraflagellar transport (IFT) and poorly understood membrane trafficking events. Defects in ciliary transport contribute to the etiology of human ciliary disease such as Bardet-Biedl syndrome (BBS). In this study, we employ the genetically tractable nematode Caenorhabditis elegans to investigate whether endocytosis genes function in cilium formation and/or the transport of ciliary membrane or ciliary proteins. Results: Here we show that localization of the clathrin light chain, AP-2 clathrin adaptor, dynamin, and RAB-5 endocytic proteins overlaps with a morphologically discrete periciliary membrane compartment associated with sensory cilia. In addition, ciliary transmembrane proteins such as G protein-coupled receptors concentrate at periciliary membranes. Disruption of endocytic gene function causes expansion of ciliary and/or periciliary membranes as well as defects in the ciliary targeting and/or transport dynamics of ciliary transmembrane and IFT proteins. Finally, genetic analyses reveal that the ciliary membrane expansions in dynamin and AP-2 mutants require bbs-8 and rab-8 function and that sensory signaling and endocytic genes may function in a common pathway to regulate ciliary membrane volume. Conclusions: These data implicate C. elegans endocytosis proteins localized at the ciliary base in regulating ciliary and periciliary membrane volume and suggest that membrane retrieval from these compartments is counterbalanced by BBS-8 and RAB-8-mediated membrane delivery.