The present invention provides two novel polypeptides, referred to as the "N"
and "C" fragments of hedgehog, or N-terminal and C-terminal fragments, respectively,
which are derived after specific cleavage at a GCF site recognized by the
autoproteolytic domain in the native protein. Also included are sterol-modified
hedgehog polypeptides and functional fragments thereof. Methods of identifying
compositions which affect hedgehog activity based on inhibition of cholesterol
modification of hedgehog protein are described.
