Functions as transcription regulator in the hedgehog (Hh) pathway (PubMed:9006072). Functions as transcriptional activator (PubMed:10806483). May also function as transcriptional repressor (PubMed:10433919). Requires STK36 for full transcriptional activator activity (PubMed:10806483). Binds to the DNA sequence 5'-GAACCACCCA-3' which is part of the TRE-2S regulatory element (By similarity). Is involved in the smoothened (SHH) signaling pathway (PubMed:10433919). Required for normal skeleton development (PubMed:9006072). Interacts with ZIC1 and ZIC2 (PubMed:11238441). Interacts with STK36 (PubMed:10806483). Interacts with SUFU; this inhibits transcriptional activation mediated by GLI2 (PubMed:10806483, PubMed:23034632). Interacts (via C-terminal internal region) with FOXC1 (via N-terminus); this interaction is direct and increases GLI2 DNA-binding and transcriptional activity through a smoothened (SMO)-independent Hedgehog (Hh) signaling pathway (PubMed:26565916, PubMed:25808752). STK36 promotes translocation to the nucleus (PubMed:10806483). In keratinocytes, it is sequestered in the cytoplasm by SUFU. In the absence of SUFU, it translocates to the nucleus (PubMed:23034632). The N-terminal domain confers transcriptional repressor activity, while the C-terminal domain mediates transcriptional activation. Phosphorylated in vitro by ULK3. Phosphorylated by DYRK2; this inhibits GLI2 transcription factor activity and promotes proteasomal degradation of GLI2. Acetylation at Lys-740 inhibits Hh target gene expression, probably by impeding entry into chromatin thus preventing promoter occupancy. Full embryonic lethality. Homozygous embryos are detected at the expected Mendelian rate up to about 18.5 dpc, but there are no live pups. Mutant embryos present important craniofacial defects, including defects of the medial portion of the frontal and parietal skull bones, absence of upper and/or lower incisors, often combined with a cleft palate. Besides, mutant embryos show defects in the ossification of skeletal bones and shortened limb bones. Belongs to the GLI C2H2-type zinc-finger protein family.