The Suppressor of Fused (SUFU) protein plays an essential role in the Hedgehog (HH) signaling pathway, by regulation of the GLI transcription factors. Two major isoforms of human SUFU are known, a full-length (SUFU-FL) and a carboxy-terminal truncated (SUFU- ΔC) variant. Even though SUFU- ΔC is expressed at an equivalent level as SUFU-FL in certain tissues, the function of SUFU-ΔC and its impact on HH signal transduction is still unclear. In two cell lines from rhabdomyosarcoma, a tumor type associated with deregulated HH signaling, SUFU-ΔC mRNA was expressed at comparable levels as SUFU-FL mRNA, but at the protein level only low amounts of SUFU-ΔC were detectable. Heterologous expression provided support to the notion that the SUFU-ΔC protein is less stable compared to SUFU-FL. Despite this, biochemical analysis revealed that SUFU-ΔC could repress GLI2 and GLI1ΔN, but not GLI1FL, transcriptional activity to the same extent as SUFU-FL. Moreover, under conditions of activated HH signaling SUFU-ΔC was more effective than SUFU-FL in inhibiting GLI1ΔN. Importantly, co-expression with GLI1FL indicated that SUFU-ΔC but not SUFU-FL reduced the protein levels of GLI1FL. Additionally, confocal microscopy revealed a co-localization of GLI1FL with SUFU-ΔC but not SUFU-FL in aggregate structures. Moreover, specific siRNA mediated knock-down of SUFU-ΔC resulted in up-regulation of the protein levels of GLI1FL and the HH signaling target genes PTCH1 and HHIP. Our results are therefore suggesting the presence of novel regulatory controls in the HH signaling pathway, which are elicited by the distinct mechanism of action of the two alternative spliced SUFU proteins.