SARS-CoV-2 enters cells via its spike glycoprotein which must be cleaved sequentially at the S1/S2, then the S2’ cleavage sites (CS) to mediate membrane fusion. SARS-CoV-2 has a unique polybasic insertion at the S1/S2 CS, which we demonstrate can be cleaved by furin. Using lentiviral pseudotypes and a cell-culture adapted SARS-CoV-2 virus with a S1/S2 deletion, we show that the polybasic insertion is selected for in lung cells and primary human airway epithelial cultures but selected against in Vero E6, a cell line used for passaging SARS-CoV-2. We find this selective advantage depends on expression of the cell surface protease, TMPRSS2, that allows virus entry independent of endosomes thus avoiding antiviral IFITM proteins. SARS-CoV-2 virus lacking the S1/S2 furin CS was shed to lower titres from infected ferrets and was not transmitted to cohoused sentinel animals. Thus, the polybasic CS is a key determinant for efficient SARS-CoV-2 transmission.