Hedgehog (Hh) family members are secreted proteins that can act at short and long range to direct cell fate decisions during developmental processes. In both Drosophila and vertebrates, the morphogenetic gradient of Hh must be tightly regulated for correct patterning. The posttranslational modification of Hh by a cholesterol adduct participates in such regulation. We have shown that cholesterol modification is necessary for the controlled long-range activity of Drosophila Hh, as observed for its vertebrate counterpart Sonic Hh. The presence of cholesterol on Hh allows the observation oflarge apicalpunctuatestructures of Hh (Hh-LPSs) at a distance from the Hh source both in embryos and in imaginal discs. The Hh-LPSs apical distribution reflects the Hh gradient and is temporally regulated. Hh gradient modulation is directly related to the dynamic expression of the Hh target geneserrate(ser), shown by immunofluorescent detection of Hh coupled with fluorescentin situhybridization ofser.