The tumor suppressor gene patched (ptc) encodes an approximately 140 kDa polytopic transmembrane protein [1-3] [corrected] that binds members of the Hedgehog (Hh) family of signaling proteins [4-6] [corrected] and regulates the activity of Smoothened (Smo), a G protein-coupled receptor-like protein essential for Hh signal transduction [7-9] [corrected]. Ptc contains a sterol-sensing domain (SSD) [10, 11] [corrected], a motif found in proteins implicated in the intracellular trafficking of cholesterol [12] [corrected], and/or other cargoes [13-15] [corrected]. Cholesterol plays a critical role in Hedgehog (Hh) signaling by facilitating the regulated secretion and sequestration of the Hh protein [16] [corrected], to which it is covalently coupled. In addition, cholesterol synthesis inhibitors block the ability of cells to respond to Hh [18, 19] [corrected], and this finding points to an additional requirement for the lipid in regulating downstream components of the Hh signaling pathway. Although the SSD of Ptc has been linked to both the sequestration of, and the cellular response to Hh [16, 20, 21] [corrected], definitive evidence for its function has so far been lacking. Here we describe the identification and characterization of two missense mutations in the SSD of Drosophila Ptc; strikingly, while both mutations abolish Smo repression, neither affects the ability of Ptc to interact with Hh. We speculate that Ptc may control Smo activity by regulating an intracellular trafficking process dependent upon the integrity of the SSD.