The hedgehog (HH) family of ligands plays an important instructional role in metazoan development. HH proteins are initially produced as approximately 45-kDa full-length proteins, which undergo an intramolecular cleavage to generate an amino-terminal product that subsequently becomes cholesterol-modified (HH-Np). It is well accepted that this cholesterol-modified amino-terminal cleavage product is responsible for all HH-dependent signaling events. Contrary to this model we show here that full-length forms of HH proteins are able to traffic to the plasma membrane and participate directly in cell-cell signaling, both in vitro and in vivo. We were also able to rescue a Drosophila eye-specific hh loss of function phenotype by expressing a full-length form of hh that cannot be processed into HH-Np. These results suggest that in some physiological contexts full-length HH proteins may participate directly in HH signaling and that this novel activity of full-length HH may be evolutionarily conserved.