How does cholesterol affect the way Hedgehog works?

Members of the Hedgehog (Hh) family of proteins are conserved morphogens that spread and modulate cell fates in target tissue. Mature Hh carries two lipid adducts, a palmitoyl group at the N terminus and cholesterol at the C terminus. Recent findings have addressed how these lipid modifications affect the function and transport of Hh in Drosophila. In contrast to the palmitoyl adduct, cholesterol appears not to be essential for signalling. However, the absence of the cholesterol adduct affects the spread of Hh within tissues. As we discuss here, the exact nature of this effect is controversial.