Hedgehog (HH) proteins are proteolytically processed into a biologically active form that is covalently modified by cholesterol and palmitate. However, most studies of HH biogenesis have characterized protein from cells in which HH is overexpressed. We purified Sonic Hedgehog (SHH) from cells expressing physiologically relevant levels and showed that it was more potent than SHH isolated from overexpressing cells. Furthermore, the SHH in our preparations was modified with a diverse spectrum of fatty acids on its amino termini, and this spectrum of fatty acids varied dramatically depending on the growth conditions of the cells. The fatty acid composition of SHH affected its trafficking to lipid rafts as well as its potency. Our results suggest that HH proteins exist as a family of diverse lipid-speciated proteins that might be altered in different physiological and pathological contexts in order to regulate distinct properties of HH proteins.