β-Arrestins mediate internalization of plasma membrane receptors. Nephrin, a structural component of the glomerular slit diaphragm, is a single transmembrane spanning receptor and belongs to the family of adhesion molecules. Its mutation causes a hereditary nephrotic syndrome. We report the previously undescribed interaction of β-arrestin2 with the nephrin C terminus. The phosphorylation status of nephrin Y1193 regulates inversely the binding of β-arrestin2 and podocin. The Src-family member Yes, known to enhance podocin–nephrin interaction by nephrin phosphorylation, diminishes β-arrestin2–nephrin interaction. β-Arrestin2 induces nephrin endocytosis and attenuates nephrin signaling. This finding suggests that nephrin Y1193 serves as a molecular switch that determines the integrity of the slit diaphragm by functional competition between β-arrestin2 and podocin. This concept offers a molecular pathomechanism of slit diaphragm distortion and opens therapeutic avenues for glomerular diseases.