Cellular signaling processes can exhibit pronounced cell-to-cell variability in genetically identical cells. This affects how individual cells respond differentially to the same environmental stimulus. However, the origins of cell-to-cell variability in cellular signaling systems remain poorly understood. Here, we measure the dynamics of phosphorylated MEK and ERK across cell populations and quantify the levels of population heterogeneity over time using high-throughput image cytometry. We use a statistical modeling framework to show that extrinsic noise, particularly that from upstream MEK, is the dominant factor causing cell-to-cell variability in ERK phosphorylation, rather than stochasticity in the phosphorylation/dephosphorylation of ERK. We furthermore show that without extrinsic noise in the core module, variable (including noisy) signals would be faithfully reproduced downstream, but the within-module extrinsic variability distorts these signals and leads to a drastic reduction in the mutual information between incoming signal and ERK activity.