Hedgehog (Hh) moves from the producing cells to regulate the growth and development of distant cells in a variety of tissues. Here, we have investigated the mechanism of Hh release from the producing cells to form a morphogenetic gradient in the Drosophila wing imaginal disk epithelium. We describe that Hh reaches both apical and basolateral plasma membranes, but the apical Hh is subsequently internalized in the producing cells and routed to the basolateral surface, where Hh is released to form a longrange gradient. Functional analysis of the 12-transmembrane protein Dispatched, the glypican Dally-like (Dlp) protein, and the Iglike and FNNIII domains of protein Interference Hh (Ihog) revealed that Dispatched could be involved in the regulation of vesicular trafficking necessary for basolateral release of Hh, Dlp, and Ihog. We also show that Dlp is needed in Hh-producing cells to allow for Hh release and that Ihog, which has been previously described as an Hh coreceptor, anchors Hh to the basolateral part of the disk epithelium.

The Hedgehog signalling pathway is crucial for development, adult stem cell maintenance, cell migration and axon guidance in a wide range of organisms. During development, the Hh morphogen directs tissue patterning according to a concentration gradient. Lipid modifications on Hh are needed to achieve graded distribution, leading to debate about how Hh is transported to target cells despite being membrane-tethered. Cytonemes in the region of Hh signalling have been shown to be essential for gradient formation, but the carrier of the morphogen is yet to be defined. Here we show that Hh and its co-receptor Ihog are in exovesicles transported via cytonemes. These exovesicles present protein markers and other features of exosomes. Moreover, the cell machinery for exosome formation is necessary for normal Hh secretion and graded signalling. We propose Hh transport via exosomes along cytonemes as a significant mechanism for the restricted distribution of a lipid-modified morphogen.

The Hedgehog (Hh) family of morphogenetic proteins has important instructional roles in metazoan development. Despite Hh being modified by Ct-cholesterol and Nt-palmitate adducts, Hh migrates far from its site of synthesis and programs cellular outcomes, depending on its local concentrations. We show that in the receiving cells of the Drosophila wing imaginal disc, lipidunmodified Hh spreads across many more cell diameters than the wild type and this spreading leads to the activation of low but not high threshold responses. Unlipidated Hh forms become internalized through the apical plasma membrane, while wild-type Hh enters through the basolateral cell surface -in all cases via a dynamin-dependent mechanism. Full activation of the Hh pathway and the spread of Hh throughout the extracellular matrix depend on the ability of lipid-modified Hh to interact with heparan sulfate proteoglycans (HSPG). However, neither Hh-lipid modifications nor HSPG function are required to activate the targets that respond to low levels of Hh. All these data show that the interaction of lipid-modified Hh with HSPG is important both for precise Hh spreading through the epithelium surface and for correct Hh reception.