The Drosophila Hedgehog protein and its vertebrate counterpart Sonic hedgehog are required for a wide variety of patterning events throughout development. Hedgehog proteins are secreted from cells and undergo autocatalytic cleavage and cholesterol modification to produce a mature signaling domain. This domain of Sonic hedgehog has recently been shown to acquire an N-terminal acyl group in cell culture. We have investigated the in vivo role that such acylation might play in appendage patterning in mouse and Drosophila; in both species Hedgehog proteins define a posterior domain of the limb or wing. A mutant form of Sonic hedgehog that cannot undergo acylation retains significant ability to repattern the mouse limb. However, the corresponding mutation in Drosophila Hedgehog renders it inactive in vivo, although it is normally processed. Furthermore, overexpression of the mutant form has dominant negative effects on Hedgehog signaling. These data suggest that the importance of the N-terminal cysteine of mature Hedgehog in patterning appendages differs between species.