The Hedgehog (Hh)-signaling pathway is essential for numerous developmental processes in Drosophila and vertebrate embryos. Hh signal transduction encompasses a complex series of regulatory events, including the generation of the mature Hh ligand, propagation of the ligand from source of production as well as the reception and interpretation of the signal in Hh-receiving cells. Many congenital malformations in humans are known to involve mutations in various components of the Hh-signaling pathway. This mini review summarizes some recent findings about the regulation of Hh signal transduction and describes the spectrum of human congenital malformations that are associated with aberrant Hh signaling. Based on a comparison of mouse-mutant phenotypes and human syndromes, we discuss how Hh-dependent Gli activator and repressor functions contribute to some of the congenital malformations.