The diffusion rate of lipids in the cell membrane is reduced by a factor of 5–100 from that in artificial bilayers. This slowing mechanism has puzzled cell biologists for the last 25 yr. Here we address this issue by studying the movement of unsaturated phospholipids in rat kidney fibroblasts at the single molecule level at the temporal resolution of 25 μs. The cell membrane was found to be compartmentalized: phospholipids are confined within 230-nm-diameter (φ) compartments for 11 ms on average before hopping to adjacent compartments. These 230-nm compartments exist within greater 750-nm-φ compartments where these phospholipids are confined for 0.33 s on average. The diffusion rate within 230-nm compartments is 5.4 μm 2/s, which is nearly as fast as that in large unilamellar vesicles, indicating that the diffusion in the cell membrane is reduced not because diffusion per se is slow, but because the cell membrane is compartmentalized with regard to lateral diffusion of phospholipids. Such compartmentalization depends on the actin-based membrane skeleton, but not on the extracellular matrix, extracellular domains of membrane proteins, or cholesterol-enriched rafts. We propose that various transmembrane proteins anchored to the actin-based membrane skeleton meshwork act as rows of pickets that temporarily confine phospholipids.