Hedgehog (Hh) signaling plays a central role during development in most animals, including mammals, while aberrant activation of the Hh response is associated with common cancers. Hhs are synthesized as pro-proteins that undergo an autoproteolytic event yielding the active N-terminal domain (HhN), and a C-terminal domain (HhC). HhN has 3 domains: its N-terminus binds the Hh receptor Patched (Ptch), the middle domain binds calcium (Ca) and the third domain coordinates zinc (Zn). The Ca- and Zn-binding domains (the bulk of HhN) are up to 65% identical to some bacterial peptidases (BacHhs), including all residues predicted to mediate catalysis and allosteric regulation. Many of these conserved residues are found mutated in holoprosencephaly, a congenital birth defect, emphasizing their importance for normal Hh function. Preliminary studies show that the peptidase activity intrinsic to Shh (a vertebrate Hh) is required for its release into the extracellular matrix (ECM) and the supernatant and thus for non-cell autonomous signaling. The inclusion of Shh in a highly conserved family of peptidases that spans multiple domains of life, combined with observations that the peptidase activity of Shh is required for Shh distribution and signaling form the premise of the hypothesis that ShhN is a Ca- regulated Zn-peptidase that mediates its release to allow non-cell autonomous signaling. Using Shh mutants in addition to BacHh/Shh mosaics, Aim1 will examine Shh residues that are required for catalysis, substrate recognition, and Ca regulation by assessing Shh distribution and signaling. Aim 2 will determine the substrates of Shh-mediated catalysis. Two plausible, non-mutually exclusive, substrates for Shh are Shh itself, including the removal of hydrophobic anchors or the release of the Ptch1-dinding domain, and ECM proteoglycans. In particular, heparan sulphate proteoglycans (HSPGs) that affect Shh signaling and extracellular distribution are assessed as substrates. Further characterization of the Shh-associated peptidase activity and identification of substrates will have major ramification in understanding the role of Shh as a developmental morphogen and will likely provide new targets to suppress non-cell autonomous Shh signaling that is a driving force in several cancers.