Patched (Ptc) is the ligand-binding component of the Hedgehog (Hh) receptor complex. In the Drosophila embryo, Ptc and Hh colocalize in vesicular punctate structures. However, receptor-mediated endocytosis of Hh proteins has not been demonstrated. By using chick neural plate explants, we show that Sonic hedgehog (Shh)-responsive neural precursor cells internalize recombinant and endogenous Shh and provide direct evidence for a gradient of endogenous Shh in the ventral neural tube. Shh internalization is blocked by a monoclonal antibody whose epitope overlaps the Ptc-binding site of Shh. These findings suggest that Shh internalization is mediated by Ptc-1 and may be linked to signaling. Concordantly, transfection of mammalian cell lines with a Ptc-1 cDNA confers the ability to internalize multiple forms of Shh, including transmembrane-anchored Shh, by a dynamin-dependent process.