Holoprosencephaly (HPE) is a failure of the forebrain to bifurcate and is the most common structural malformation of the embryonic brain. Mutations in SHH underlie most familial (17%) cases of HPE; and, consistent with this, Shh is expressed in midline embryonic cells and tissues and their derivatives that are affected in HPE. It has long been recognized that a graded series of facial anomalies occurs within the clinical spectrum of HPE, as HPE is often found in patients together with other malformations such as acrania, anencephaly, and agnathia. However, it is not known if these phenotypes arise through a common etiology and pathogenesis. Here we demonstrate for the first time using mouse models that Hedgehog acyltransferase (Hhat) loss-of-function leads to holoprosencephaly together with acrania and agnathia, which mimics the severe condition observed in humans. Hhat is required for post-translational palmitoylation of Hedgehog (Hh) proteins; and, in the absence of Hhat, Hh secretion from producing cells is diminished. We show through downregulation of the Hh receptor Ptch1 that loss of Hhat perturbs long-range Hh signaling, which in turn disrupts Fgf, Bmp and Erk signaling. Collectively, this leads to abnormal patterning and extensive apoptosis within the craniofacial primordial, together with defects in cartilage and bone differentiation. Therefore our work shows that Hhat loss-of-function underscrores HPE; but more importantly it provides a mechanism for the co-occurrence of acrania, holoprosencephaly, and agnathia. Future genetic studies should include HHAT as a potential candidate in the etiology and pathogenesis of HPE and its associated disorders.