The Sonic hedgehog (Shh) signaling pathway controls a variety of developmental processes and is implicated in tissue homeostasis maintenance and neurogenesis in adults. Recently, we identified Ulk3 as an active kinase able to positively regulate Gli proteins, mediators of the Shh signaling in mammals. Here, we provide several lines of evidence that Ulk3 participates in the transduction of the Shh signal also independently of its kinase activity. We demonstrate that Ulk3 through its kinase domain interacts with Suppressor of Fused (Sufu), a protein required for negative regulation of Gli proteins. Sufu blocks Ulk3 autophosphorylation and abolishes its ability to phosphorylate and positively regulate Gli proteins. We show that Shh signaling destabilizes the Sufu-Ulk3 complex and induces the release of Ulk3. We demonstrate that the Sufu-Ulk3 complex, when co-expressed with Gli2, promotes generation of the Gli2 repressor form, and that reduction of the Ulk3 mRNA level in Shh-responsive cells results in higher potency of the cells to transmit the Shh signal. Our data suggests a dual function of Ulk3 in the Shh signal transduction pathway and propose an additional way of regulating Gli proteins by Sufu, through binding to and suppression of Ulk3.