The Hedgehog (Hh) signaling pathway plays a central role in specifying the embryonic patterning of metazoan organs. Post-embryonically, Hh signaling mediates homeostatic regeneration of adult tissues and is associated with numerous cancers when inappropriately active. Despite its importance in development, physiology, and disease we fundamentally do not understand how the extracellular Hedgehog signal is transduced across the membrane. The central question is the mechanism by which the Hh receptor Patched (Ptc; Ptch1 in mammals), a transporter-like protein, acts to regulate Smoothened (Smo), a member of the seven transmembrane protein family. From flatworms to insects to mammals, Ptc inhibits Smo activity in the absence of Hh, and thisinhibition is lifted upon Hh binding to Ptc and its co-receptors, thu releasing Smo for pathway activation through a series of downstream events and consequent changes in gene transcription. Mechanistically, Ptch1 is thought to act as a proton-dependent transmembrane transporter of a lipidic modulator of Smo activity across the membrane, but this modulator remains to be identified. In addition, mammalian Hh signal transduction has been linked to the primary cilium, but the actual role of the primary cilium in transduction is not understood. To elucidate the molecular and cellular mechanisms of Hh receptor function in the cilium we propose to define intrinsic sequence requirements and cellular factors required for Ptch1/Smo ciliary trafficking and signal transduction, focusing in particular on signals and factors that are regulated by Hh pathway activity. We will identify endogenous small molecules that mediate Ptch1 regulation of Smo activity, having initially identified Chlamydomonas flagella as an enriched source of such a modulatory lipid. We will test whether Ptch1 functions as a transmembrane transporter that depends on a chemiosmotic gradient and investigate the effects of Ptch1 function on the dynamics of Smo ciliary trafficking. Our findings will be integrated into a detailed cellular and molecular account of Hh signal transduction, and may provide a basis for improvements in therapies for Hh pathway-dependent cancers.