The steroidal alkaloid cyclopamine has both teratogenic and antitumor activities arising from its ability to specifically block cellular responses to vertebrate Hedgehog signaling. We show here, using photoaffinity and fluorescent derivatives, that this inhibitory effect is mediated by direct binding of cyclopamine to the heptahelical bundle of Smoothened (Smo). Cyclopamine also can reverse the retention of partially misfolded Smo in the endoplasmic reticulum, presumably through binding-mediated effects on protein conformation. These observations reveal the mechanism of cyclopamine's teratogenic and antitumor activities and further suggest a role for small molecules in the physiological regulation of Smo. Plants of the genus Veratrum have a long history of use in the folk remedies of many cultures (Namba 1993;Levetin and McMahon 1996), and the jervine family of alkaloids (Fried and Klingsberg 1953), which constitute a majority of Veratrum secondary metabolites, have been used for the treatment of hypertension and cardiac disease. The association of Veratrum californicum with an epidemic of sheep congenital deformities during the 1950s (Binns et al. 1962) raised the possibility that jervine alkaloids are also potent teratogens. Extensive investigations by the U.S. Department of Agriculture subsequently confirmed that jervine and cyclopamine (11-deoxojervine) given during gestation can directly induce cephalic defects in lambs, including cyclopia in the most severe cases (Keeler and Binns 1965).It is now known that the teratogenic effects of jervine and cyclopamine are due to their specific inhibition of vertebrate cellular responses to the Hedgehog (Hh) family of secreted growth factors (Cooper et al. 1998;Incardona et al. 1998), as first suggested by similarities between the Vertarum-induced developmental malformations and holoprosencephaly-like abnormalities associated with loss of Sonic hedgehog (Shh) function (Chiang et al. 1996;Roessler et al. 1996). In accordance with this general mechanism, cyclopamine also has shown some promise in the treatment of medulloblastoma tumors caused by inappropriate Hh pathway activation (Berman et al. 2002). How cyclopamine specifically inhibits Hh pathway activation is unclear, but it appears to interfere with the initial events of vertebrate Hh signal reception, which involve the multipass transmembrane (TM) proteins Patched (Ptch) and Smoothened (Smo;Ingham and McMahon 2001). During normal Hh signaling, Hh proteins bind to Ptch (Marigo et al. 1996;Stone et al. 1996;Fuse et al. 1999), thereby alleviating Ptch-mediated suppression of Smo, a distant relative of G-protein-coupled receptors (GCPRs). Smo activation then triggers a series of intracellular events, culminating in the activation of Gli-dependent transcription (Alexandre et al. 1996;Aza-Blanc et al. 1997).Cyclopamine appears to interfere with these signaling events by influencing Smo function, as it antagonizes Hh pathway activity in a Ptch-independent manner and exhibits attenuated potency toward an oncogenic, const...