The Hedgehog (Hh) signal is transduced via Cubitus interruptus (Ci) to specify cell fates in the Drosophila wing. In the absence of Hh, the 155 kDa full-length form of Ci is cleaved into a 75 kDa repressor. Hh inhibits the proteolysis of full-length Ci and facilitates its conversion into an activator. Recently, it has been suggested that Hh promotes Ci nuclear import in tissue culture cells. We have studied the mechanism of Ci nuclear import in vivo and the relationship between nuclear import, stabilization and activation. We found that Ci rapidly translocates to the nucleus in cells close to the anteroposterior (AP) boundary and this rapid nuclear import requires Hh signaling. The nuclear import of Ci is regulated by Hh even under conditions in which Ci is fully stabilized. Furthermore, cells that exhibit Ci stabilization and rapid nuclear import do not necessarily exhibit maximal Ci activity. It has been previously shown that stabilization does not suffice for activation. Consistent with this finding, our results suggest that the mechanisms regulating nuclear import, stabilization and activation are distinct from each other. Finally, we show that cos2 and pka, two molecules that have been characterized primarily as negative regulators of Ci activity, also have positive roles in the activation of Ci in response to Hh.