Proliferation and cell fate determination in the developing embryo are extrinsically regulated by multiple interactions among diverse secreted factors, such as Sonic Hedgehog (SHh), which act in a concentration-dependent manner. The fact that SHh is secreted as a lipid-modified protein suggests the existence of a mechanism to regulate its movement across embryonic fields. We have previously shown that heparan sulfate proteoglycans (HSPGs) are required for SHh binding and signalling. However, it was not determined which specific HSPG was responsible for these functions. Here we evaluated the contribution of perlecan on SHh localization and activity. To understand the mechanism of action of perlecan at the cellular level, we studied the role of perlecan-SHh interaction in SHh activity using both cell culture and biochemical assays. Our findings show that perlecan is a crucial anchor and modulator of SHh activity acting as an extracellular positive regulator of SHh.