Abstract
Hedgehog ligands activate an evolutionarily conserved signaling pathway that provides instructional cues during tissue morphogenesis, and when corrupted, contributes to developmental disorders and cancer. The transmembrane protein Dispatched is an essential component of the machinery that deploys Hedgehog family ligands from producing cells, and is absolutely required for signaling to long-range targets. Despite this crucial role, regulatory mechanisms controlling Dispatched activity remain largely undefined. Herein, we reveal vertebrate Dispatched is activated by proprotein convertase-mediated cleavage at a conserved processing site in its first extracellular loop. Dispatched processing occurs at the cell surface to instruct its membrane re-localization in polarized epithelial cells. Cleavage site mutation alters Dispatched membrane trafficking and reduces ligand release, leading to compromised pathway activity in vivo. As such, convertase-mediated cleavage is required for Dispatched maturation and functional competency in Hedgehog ligand-producing cells.