The hedgehog (Hh) family of morphogens plays important instructional roles in the development of numerous metazoan structures. Consistent with the role Hh homologs play in cell fate determination, aberrant Hh signaling results in numerous human pathologies. Hh signal transduction is initiated when Hh binds to its receptor Patched (Ptc), activating the transmembrane protein Smoothened (Smo). Smo transmits its activation signal to a microtubule-associated Hedgehog signaling complex (HSC). At a minimum, the HSC consists of the Kinesin-related protein Costal2 (Cos2), the protein kinase Fused (Fu), and the transcription factor Cubitus interruptus (Ci). In response to HSC activation, the ratio between repressor and activator forms of Ci is altered, determining the expression levels of various Hh target genes. The steps between Smo activation and signaling to the HSC have not been described. Here, we describe a functional interaction between Smo and Cos2, which is necessary for Hh signaling. We propose that this interaction is direct and allows for activation of Ci in response to Hh. This work fills in the last major gap in our understanding of the Hh signal transduction pathway by suggesting that no intermediate signal is required to connect Smo to the HSC.