Smith-Lemli-Opitz syndrome (SLOS), desmosterolosis and lathosterolosis are human syndromes caused by defects in the final stages of cholesterol biosynthesis. Many of the developmental malformations in these syndromes occur in tissues and structures whose embryonic patterning depends on signaling by the Hedgehog (Hh) family of secreted proteins. Here we report that response to the Hh signal is compromised in mutant cells from mouse models of SLOS and lathosterolosis and in normal cells pharmacologically depleted of sterols. We show that decreasing levels of cellular sterols correlate with diminishing responsiveness to the Hh signal. This diminished response occurs at sterol levels sufficient for normal autoprocessing of Hh protein, which requires cholesterol as cofactor and covalent adduct. We further find that sterol depletion affects the activity of Smoothened (Smo), an essential component of the Hh signal transduction apparatus.