Hedgehog (Hh) is a secreted morphogen that elicits differentiation and patterning in developing tissues. Multiple proposed mechanisms to regulate Hh dispersion includes lipoprotein particles and exosomes. Here we report that vertebrate Sonic Hedgehog (Shh) is secreted on two types of extracellular-vesicles/exosomes, from human cell lines and primary chick notochord cells. Although largely overlapping in size as estimated from electron micrographs, the two exosomal fractions exhibited distinct protein and RNA composition. We have probed the functional properties of these vesicles using cell-based assays of Hh-elicited gene expression. Our results suggest that while both Shh-containing exo-vesicular fractions can activate an ectopic Gli-luciferase construct, only exosomes co-expressing Integrins can activate endogenous Shh target genes HNF3β and Olig2 during the differentiation of mouse ES cells to ventral neuronal progenitors. Taken together, our results demonstrate that primary vertebrate cells secrete Shh in distinct vesicular forms, and support a model where packaging of Shh along with other signaling proteins such as Integrins on exosomes modulates target gene activation. The existence of distinct classes of Shh-containing exosomes also suggests a previously unappreciated complexity for fine-tuning of Shh-mediated gradients and pattern formation.