The ihog gene (interference hedgehog), identified by RNA interference in Drosophila cultured cells, encodes a type 1 membrane protein shown here to bind and to mediate response to the active Hedgehog (Hh) protein signal. ihog mutations produce defects characteristic of Hh signaling loss in embryos and imaginal discs, and epistasis analysis places ihog action at or upstream of the negatively acting receptor component, Patched (Ptc). The first of two extracellular fibronectin type III (FNIII) domains of the Ihog protein mediates a specific interaction with Hh protein in vitro, but the second FNIII domain is additionally required for in vivo signaling activity and for Ihog-enhanced binding of Hh protein to cells coexpressing Ptc. Other members of the Ihog family, including Drosophila Boi and mammalian CDO and BOC, also interact with Hh ligands via a specific FNIII domain, thus identifying an evolutionarily conserved family of membrane proteins that function in Hh signal response.