The C-terminal part of the desert hedgehog protein precursor displays an autoproteolysis and a cholesterol transferase activity (By similarity). Both activities result in the cleavage of the full-length protein into two parts (DhhN and DhhC) followed by the covalent attachment of a cholesterol moiety to the C-terminal of the newly generated DhhN (By similarity). Both activities occur in the reticulum endoplasmic (By similarity). The dually lipidated desert hedgehog protein N-product (DhhNp) is essential for a variety of patterning events during development (By similarity). Involved in the early induction and patterning of anterodorsal ectoderm, nervous system and somites. Induces ectopic cement gland formation in embryos (PubMed:7671800). Binds to the patched (PTCH1) receptor, which functions in association with smoothened (SMO), to activate the transcription of target genes (By similarity). cholesterol + glycyl-L-cysteinyl-[protein] + H(+) = [protein]-C-terminal glycyl cholesterol ester + N-terminal L-cysteinyl-[protein] Multimer. Interacts with BOC and CDON. Interacts with HHIP. Co-localizes with HHAT in the ER and Golgi membrane. Binds calcium and zinc ions; this stabilizes the protein fold and is essential for protein-protein interactions mediated by this domain. The C-terminal domain regulates the auto-processing and controls the juxtacrine signaling. Partially autoproteolyzed (By similarity). The C-terminal domain displays an autoproteolysis activity and a cholesterol transferase activity (By similarity). Both activities result in the cleavage of the full-length protein and covalent attachment of a cholesterol moiety to the C-terminal of the newly generated N-terminal fragment (DhhN) (By similarity). N-palmitoylation by HHAT of DhhN is required for desert hedgehog protein N-product multimerization and full activity (By similarity). Belongs to the hedgehog family.