Hedgehog (Hh) signaling plays a major role in multiple aspects of embryonic development. To understand how a single Hh signal is capable of generating distinct readouts in Hh-responsive cells requires elucidation of the signal transduction cascade at the molecular level. Key components that mediate Hh signal transduction downstream of the receptor include Fused (Fu), Suppressor of fused (Sufu), and Costal-2 (Cos2) or the vertebrate homologs Kif27/Kif7. Studies with both invertebrates and vertebrates have led to a model in which a protein complex composed of Fu, Sufu, and Cos2 controls the processing, activity, and subcellular distribution of the Ci/Gli transcription factors responsible for Hh target gene activation. These converging results obtained with different species reaffirm the prevailing view of pathway conservation during evolution. Genetic studies of Fu, Sufu, and Kif27/Kif7 in mice are required to provide further verification of Hh pathway conservation. To this end, we generated a gene-targeted allele of Fu in mice. Surprisingly, our analysis indicates that Fu-deficient mice do not exhibit any embryonic phenotypes indicative of perturbed Hh signaling. This could be due to either functional redundancy or Hh pathway divergence and clearly indicates greater complexity of Hh signaling in vertebrates.