The Hedgehog gene was initially identified in Drosophila as a morphogen involved in segment polarity. In vertebrates, the Hedgehog family is represented by at least three members: Desert hedgehog (Dhh), Indian hedgehog (Ihh), and Sonic hedgehog (Shh). Hedgehog signaling occurs through two proteins, Patched (Ptc), a twelve-pass transmembrane protein that binds to the Hedgehog ligand, and Smoothened (Smo), a seven-pass transmembrane protein that transmits a downstream signal. In the absence of the Hedgehog ligand, Ptc inhibits Smo activity, and downstream target genes are inactivated by a processed form of the transcriptional repressor, Cubitus interruptus (Ci) in Drosophila, or Gli-1, -2, or -3 in vertebrates. Both the Fused and Suppressor of Fused proteins contribute to the inhibition of Ci/Gli-mediated transcriptional activation. Fused is a serine/threonine kinase that phosphorylates Ci/Gli to promote Ci/Gli processing, while Suppressor of Fused inhibits Ci/Gli by preventing its nuclear translocation. To initiate signaling, Hedgehog proteins undergo autocatalytic processing and cholesterol modification to yield an activated N-terminal domain. Upon ligand binding to Ptc, Smo is activated, phosphorylation and cleavage of Ci/Gli is inhibited, and full-length Ci/Gli translocates to the nucleus to activate the transcription of its target genes. Shh signaling in vertebrates is involved in diverse areas of development, including neurogenesis, hematopoiesis, bone formation, and gonad development.