The Hedgehog (Hh) family of secreted proteins governs a wide variety of processes during embryonic development and adult tissue homeostasis. Here we review the current understanding of the molecular and cellular basis of Hh morphogen gradient formation and signal transduction, and the multifaceted roles of Hh signaling in development and tumorigenesis. We discuss how the Hh pathway has diverged during evolution and how it integrates with other signaling pathways to control cell growth and patterning.