Blood-central nervous system (CNS) barriers partition neural tissues from the blood, providing a homeostatic environment for proper neural function. The endothelial cells that form blood-CNS barriers have specialized tight junctions and low rates of transcytosis to limit the flux of substances between blood and CNS. However, the relative contributions of these properties to CNS barrier permeability are unknown. Here, by studying functional blood-retinal barrier (BRB) formation in mice, we found that immature vessel leakage occurs entirely through transcytosis, as specialized tight junctions are functional as early as vessel entry into the CNS. A functional barrier forms only when transcytosis is gradually suppressed during development. Mutant mice with elevated or reduced levels of transcytosis have delayed or precocious sealing of the BRB, respectively. Therefore, the temporal regulation of transcytosis governs the development of a functional BRB, and suppression of transcytosis is a principal contributor for functional barrier formation.