SHH binds to the patched (PTC) receptor, which functions in association with smoothened (SMO), to activate the transcription of target genes. In the absence of SHH, PTC represses the constitutive signaling activity of SMO. Also regulates another target, the gli oncogene. Intercellular signal essential for a variety of patterning events during development: signal produced by the notochord that induces ventral cell fate in the neural tube and somites, and the polarizing signal for patterning of the anterior-posterior axis of the developing limb bud. Displays both floor plate- and motor neuron-inducing activity. The threshold concentration of N-product required for motor neuron induction is 5-fold lower than that required for floor plate induction (By similarity).