Morphogenetic gradient of Hh is tightly regulated for correct patterning in Drosophila and vertebrates. The Patched (Ptc) receptor is required for restricting Hh long-range activity in the imaginal discs. In this study, we investigate the different types of Hh accretion that can be observed in the Drosophila embryonic epithelial cells. We found that, in receiving cells, large apical punctate structures of Hh (Hh-LPSs) are not depending on the Ptc receptor-dependent internalization of Hh but rather reflect Hh gradient. By analyzing the dynamic of the Hh-LPS gradient formation, we demonstrate that Hh distribution is strongly restricted during late embryonic stages compared to earlier stages. We demonstrate that the up-regulation of Ptc is required for the temporal regulation of the Hh gradient. We further show that dynamin-dependent internalization of Hh is not regulating Hh spreading but is involved in shaping Hh gradient. We found that Hh gradient modulation is directly related with the dynamic expression of the ventral Hh target gene serrate (ser) and with the Hh-dependent dorsal cell fate determination. Finally, our study shows that, in vivo, the Hh/Ptc complex is internalized in the Rab7-enriched lysosomal compartment in a Ptc-dependent manner without the co-receptor Smoothened (Smo). We propose that controlled degradation is an active mechanism important for Hh gradient formation.