The goal of this project is to understand the mechanisms by which information encoded in extracellular signals is converted complex patterns in the developing mammalian embryo. This proposal focuses on the role of Sonic hedgehog (Shh) signaling. The Shh signaling pathway is not only essential for the induction of clinically relevant neurons within the CNS, but inappropriate activation of Shh signaling has been linked to the development of several l of tumor, most notably basal cell carcinoma (BCC), the most common form of skin cancer, and medullablastoma, the most common brain tumor of children. Further, loss of Shh signaling underlies many cases of familial an spontaneous holoprosencephaly. Consequently, understanding how a Shh signal is received, transduced and modulated is likely to lead to new insights with direct relevance to human health. In view of its close relation. to the human embryo, and the availability of genetic approaches which can precisely modify gene activity, the mouse is used as an experimental system. An active Shh signal is generated by an unusual autocatalytic cleavage which leads to the covalent attachment of cholesterol to the l9 kcal signaling peptide. Cholesterol modification may play several roles in Shh-signaling, for example preventing free diffusion of ligand or participating in receptor recognition. Aim 1 proposes to explore the biological significance of cholesterol modification by generating a non-tethered allele of Shh (N-Shh). The activity of this allele in CNS and limb patterning will be addressed in the presence of normal or reduced levels of two Hedgehog binding proteins, Hip and Ptc, negative modulators of Shh signaling. Aim 2 proposes to characterize the Shh interaction domain of Hip using truncated forms of Hip produced by cultured cells, or by limited proteolysis of purified Hip. Hip's role in embryogenesis and its genetic interactions with Ptc-l, will be examined in mice carrying Hip and Ptc null mutations. A mouse strain (Shh') has been generated in which an essential exon of Shh is flanked by the target recognition sequences (loxP sites) of the P1 phage integrase, CRE. Intercrossing the conditional allele with transgenic lines express CRE allows the spatial and temporal removal of Shh function. Aim 3 proposes to adopt this strategy to address Shh action in the limb and specific regions of the developing CNS, where its role cannot be assessed with existing null mutations.