In Drosophila and vertebrates, Hedgehog (Hh) signalling is mediated by a cascade of genes, which play essential roles in cell proliferation and survival, and in patterning of the embryo, limb buds and organs. In C. elegans, this pathway has undergone considerable evolutionary divergence; genes encoding homologues of key pathway members, including Hh, Smoothened, Cos2, Fused and Suppressor of Fused, are absent. Surprisingly, over sixty proteins (i.e. WRT, GRD, GRL, and QUA), encoded by a set of genes collectively referred to as the Hh-related genes, and two co-orthologs (PTC-1,-3) of fly Patched, a Hh receptor, are present in C. elegans. Several of the Hh-related proteins are bipartite and all can potentially generate peptides with signalling activity, although none of these peptides shares obvious sequence similarity with Hh. In addition, the ptc-related (ptr) genes, which are present in a single copy in Drosophila and vertebrates and encode proteins closely related to Patched, have undergone an expansion in number in nematodes. A number of functions, including roles in molting, have been attributed to the C. elegans Hh-related, PTC and PTR proteins; most of these functions involve processes that are associated with the trafficking of proteins, sterols or sterol-modified proteins. Genes encoding other components of the Hh signalling pathway are also found in C. elegans, but their functions remain to be elucidated.