The Hedgehog (Hh) signal is transduced across the membrane by the heptahelical protein Smoothened (Smo), a developmental regulator, oncoprotein and drug target in oncology. We present the 2.3 Å crystal structure of the extracellular cysteine rich domain (CRD) of vertebrate Smo and show that it binds to oxysterols, endogenous lipids that activate Hh signaling. The oxysterol-binding groove in the Smo CRD is analogous to that used by Frizzled 8 to bind to the palmitoleyl group of Wnt ligands and to similar pockets used by other Frizzled-like CRDs to bind hydrophobic ligands. The CRD is required for signaling in response to native Hh ligands, showing that it is an important regulatory module for Smo activation. Indeed, targeting of the Smo CRD by oxysterol-inspired small molecules can block signaling by all known classes of Hh activators and by clinically relevant Smo mutants.

DOI: http://dx.doi.org/10.7554/eLife.01340.001