We investigate the molecular mechanisms of Hedgehog (Hh) signaling in mammalian development and physiology, using mouse as a model system. The Hh pathway plays a key role in many aspects of embryonic development, and dysregulation of Hh signaling is associated with human congenital anomalies and cancers. A combination of mouse genetics (transgenic and knockout mice), cell biology and biochemistry is utilized to elucidate the molecular mechanisms of Hh signaling. These studies serve as a paradigm for understanding lipid biology and vesicular trafficking in morphogen gradient formation, the involvement of cellular organelles, including the nucleus and the primary/motile cilia in receiving and interpreting the signal, and the evolution of developmental pathways. We also explore the role of Hh signaling in various aspects of postnatal physiology such as stem cell maintenance and cancer formation.