Cell signaling mediated by the Hedgehog (Hh) family of secreted proteins is essential for metazoan development and its malfunction causes congenital disorders and cancer. The seven-transmembrane protein Smoothened (Smo) transduces the Hh signal across the plasma membrane in both vertebrates and invertebrates but the underlying mechanisms remain ill defined. In Drosophila, Hh induces phosphorylation of Smo at multiple sites by PKA and CK1, leading to its cell surface accumulation and activation. Recently, we have obtained evidence that Hh-induced phosphorylation promotes Smo activity by inducing a conformational switch and dimerization of its carboxy-terminal cytoplasmic tail (C-tail). Furthermore, we provided evidence that a similar mechanism regulates mammalian Smo. We discuss how Smo conformational change regulates the intracellular signaling complex and how Smo transduces the graded Hh signaling activities through different conformational states.