(A) In the absence of Shh, Ptch localizes to the primary cilium and, through an unknown mechanism, prevents Smo from entering the cilium. Gli2 and Gli3 are phosphorylated by kinases, including PKA, CKI and GSK3, to generate phosphopeptide binding motifs for β-TrCP, which recruits an E3 ubiquitin ligase complex. Ubiquitination of Gli2 and Gli3 targets these proteins to the proteasome, which processes Gli3 into a carboxy-terminal-truncated repressor form and degrades Gli2. Gli3 subsequently enters the nucleus and inhibits transcription of downstream Hh target genes such as Ptch1 and Gli1. (B) In the presence of Shh, Ptch is internalized, allowing Smo to traffic into the primary cilium. It is unclear whether Smo traffics directly to the cilium, or accumulates first in the plasma membrane. At the cilium, Smo inhibits the formation of Gli3 repressor and activates Gli2, which enters the nucleus to promote transcription of Ptch1 and Gli1, whose protein products negatively and positively feed back on this pathway, respectively.