Glypicans are a family of heparan sulfate proteoglycans whose members are bound to the cell surface by a glycosylphosphatidylinositol (GPI) anchor. Loss-of-function mutations in GPC3, one of the six mammalian glypicans, causes the Simson-Golabi-Behmel Syndrome. This is a disorder characterized by pre- and post-natal overgrowth, a broad spectrum of visceral and skeletal abnormalities, and an increased risk for the development of embryonic tumors. GPC3-null mice also display significant overgrowth. We have recently reported that GPC3 acts as a negative regulator of Hedgehog signaling during development, and that the overgrowth caused by the lack of functional GPC3 is due, at least in part, to the hyperactivation of Hedgehog signaling. Here we discuss the rationale that led us to hypothesize that GPC3 could be a negative regulator of Hedgehog signaling, and speculate about the implications of our discovery regarding the role of GPC3 in some cancer types. We also discuss our recent results of experiments that investigated the role of the core protein, the heparan sulfate chains, and the GPI anchor in GPC3 function. Finally, we propose an explanation for the tissue-specific function of GPC3.