A novel proteolytic event controls Hedgehog intracellular sorting and distribution to receptive fields

The patterning activity of a morphogen depends on secretion and dispersal mechanisms that shape its distribution to the cells of a receptive field. In the case of the protein Hedgehog (Hh), these mechanisms of secretion and transmission remain unclear. In the developing Drosophila visual system, Hh is partitioned for release at opposite poles of photoreceptor neurons. Release into the retina regulates the progression of eye development; axon transport and release at axon termini trigger the development of postsynaptic neurons in the brain. Here we show that this binary targeting decision is controlled by a C-terminal proteolysis. Hh with an intact C-terminus undergoes axonal transport, whereas a C-terminal proteolysis enables Hh to remain in the retina, creating a balance between eye and brain development. Thus, we define a novel mechanism for the apical/basal targeting of this developmentally important protein and posit that similar post-translational regulation could underlie the polarity of related ligands.