All morphogens of the Hedgehog (Hh) family are synthesized as dual-lipidated proteins, which results in their firm attachment to the surface of the cell in which they were produced. Thus, Hh release into the extracellular space requires accessory protein activities. We suggested previously that the proteolytic removal of N-and Cterminal lipidated peptides (shedding) could be one such activity. More recently, the secreted glycoprotein Scube2 (signal peptide, cubulin domain, epidermal-growth-factor-like protein 2) was also implicated in the release of Shh from the cell membrane. This activity strictly depended on the CUB domains of Scube2, which derive their name from the complement serine proteases and from bone morphogenetic protein-1/tolloid metalloproteinases (C1r/C1s, Uegf and Bmp1). CUB domains function as regulators of proteolytic activity in these proteins. This suggested that sheddases and Scube2 might cooperate in Shh release. Here, we confirm that sheddases and Scube2 act cooperatively to increase the pool of soluble bioactive Shh, and that Scube2-dependent morphogen release is unequivocally linked to the proteolytic processing of lipidated Shh termini, resulting in truncated soluble Shh. Thus, Scube2 proteins act as protease enhancers in this setting, revealing newly identified Scube2 functions in Hh signaling regulation.

Decision making in cellular ensembles requires the dynamic release of signaling molecules from the producing cells into the extracellular compartment. One important example of molecules that require regulated release in order to signal over several cell diameters is the Hedgehog (Hh) family, because all Hhs are synthesized as dual-lipidated proteins that firmly tether to the outer membrane leaflet of the cell that produces them. Factors for the release of the vertebrate Hh family member Sonic Hedgehog (Shh) include cell-surface sheddases that remove the lipidated terminal peptides, as well as the soluble glycoprotein Scube2 that cell-nonautonomously enhances this process. This raises the question of how soluble Scube2 is recruited to cell-bound Shh substrates to regulate their turnover. We hypothesized that heparan sulfate (HS) proteoglycans (HSPGs) on the producing cell surface may play this role. In this work, we confirm that HSPGs enrich Scube2 at the surface of Shh-producing cells and that Scube2-regulated proteolytic Shh processing and release depends on specific HS. This finding indicates that HSPGs act as cell-surface assembly and storage platforms for Shh substrates and for protein factors required for their release, making HSPGs critical decision makers for Scube2-dependent Shh signaling from the surface of producing cells.

Proteolytic processing of cell-surface-bound ligands, called shedding, is a fundamental system to control cell-cell signaling. Yet, our understanding of how shedding is regulated is still incomplete. One way to increase the processing of dual-lipidated membrane-associated Sonic hedgehog (Shh) is to increase the density of substrate and sheddase. This releases and also activates Shh by the removal of lipidated inhibitory N-terminal peptides from Shh receptor binding sites. Shh release and activation is enhanced by Scube2 [signal sequence, cubulin (CUB) domain, epidermal growth factor (EGF)-like protein 2], raising the question of how this is achieved. Here, we show that Scube2 EGF domains are responsible for specific proteolysis of the inhibitory Shh N-terminus, and that CUB domains complete the process by reversing steric masking of this peptide. Steric masking, in turn, depends on Ca occupancy of Shh ectodomains, unveiling a new mode of shedding regulation at the substrate level. Importantly, Scube2 uncouples processing of Shh peptides from their lipid-mediated juxtamembrane positioning, and thereby explains the long-standing conundrum that N-terminally unlipidated Shh shows patterning activity in Scube2-expressing vertebrates, but not in invertebrates that lack Scube orthologs.

Cell fate determination during development often requires morphogen transport from producing to distant responding cells. Hedgehog (Hh) morphogens present a challenge to this concept, as all Hhs are synthesized as terminally lipidated molecules that form insoluble clusters at the surface of producing cells. While several proposed Hh transport modes tie directly into these unusual properties, the crucial step of Hh relay from producing cells to receptors on remote responding cells remains unresolved. Using wing development in Drosophila melanogaster as a model, we show that Hh relay and direct patterning of the 3–4 intervein region strictly depend on proteolytic removal of lipidated N-terminal membrane anchors. Site-directed modification of the N-terminal Hh processing site selectively eliminated the entire 3–4 intervein region, and additional targeted removal of N-palmitate restored its formation. Hence, palmitoylated membrane anchors restrict morphogen spread until site-specific processing switches membrane-bound Hh into bioactive forms with specific patterning functions.

Metazoan Hedgehog (Hh) morphogens are essential regulators of growth and patterning at significant distances from their source, despite being produced as N-terminally palmitoylated and C-terminally cholesteroylated proteins, which firmly tethers them to the outer plasma membrane leaflet of producing cells and limits their spread. One mechanism to overcome this limitation is proteolytic processing of both lipidated terminal peptides, called shedding, but molecular target site requirements for effective Hh shedding remained undefined. In this work, by using Drosophila melanogaster as a model, we show that mutagenesis of the N-terminal Cardin-Weintraub (CW) motif inactivates recombinant Hh proteins to variable degrees and, if overexpressed in the same compartment, converts them into suppressors of endogenous Hh function. In vivo, additional removal of N-palmitate membrane anchors largely restored endogenous Hh function, supporting the hypothesis that proteolytic CW processing controls Hh solubilization. Importantly, we also observed that CW repositioning impairs anterior/posterior compartmental boundary maintenance in the third instar wing disc. This demonstrates that Hh shedding not only controls the differentiation of anterior cells, but also maintains the sharp physical segregation between these receiving cells and posterior Hh-producing cells.