Suggested pathway of Smoothened(Smo) regulation via Hedgehog (Hh) and Patched (Ptch1)
When the Hedgehog protein (Hh) is not present (A.), the transmembrane Patched (Ptch1) removes oxysterols, thus preventing them from interacting with the transmembrane protein Smoothened (Smo). When Hh is bound to Ptch1 (B.), Ptch1 no longer removes oxysterols; oxysterols accumulate and activate Smo, allowing it's signalling other cellular pathways.

Inspired by diagrams created by Cyclopamine
Own work
Adenosine