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). Functions in cell-cell mediated juxtacrine signaling (By similarity). Promotes endothelium integrity (PubMed:33063110). Binds to PTCH1 receptor, which functions in association with smoothened (SMO), to activate the transcription of target genes in endothelial cells (PubMed:33063110). In Schwann cells, controls the development of the peripheral nerve sheath and the transition of mesenchymal cells to form the epithelium-like structure of the perineurial tube (PubMed:10482238). The dually lipidated desert hedgehog protein N-product (DhhNp) is essential for a variety of patterning events during development (By similarity). Binds to the patched (PTCH1) receptor, which functions in association with smoothened (SMO), to activate the transcription of target genes (PubMed:9811851). Required for normal testis development and spermatogenesis, namely for the formation of adult-type Leydig cells and normal development of peritubular cells and seminiferous tubules (PubMed:8805249, PubMed:11090455). Activates primary cilia signaling on neighboring valve interstitial cells through a paracrine mechanism (PubMed:32151560). May induce motor neurons in lateral neural tube and may have a polarizing activity. Prevents the desert hedgehog protein precursor binding to PTCH1 (By similarity). Binds PTCH2 (PubMed:9811851). 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. Expressed in adult testes (PubMed:8805249). Not expressed in limb buds. First detected at 11.5 dpc in the presumptive testis (PubMed:8805249). No expression in the ovary at this or any later time (PubMed:8805249). At 12.5 dpc testis expression is confined to Sertoli cells and is not detected in precursors of the androgen-producing interstitial somatic cells (the Leydig cells) (PubMed:8805249). At E13 expressed by Schwann cell precursors both in the dorsal and ventral roots and in the emerging spinal nerves (PubMed:10482238). Expressed in Schwann cells of newborn (PubMed:10482238). Expressed primarily within the valve endocardium at E15.5 with lower levels of expression within the trabeculated endothelium, primary atrial septum and epicardium (PubMed:32151560). Expressed within the valve endocardium at embryonic, fetal and neonatal timepoints with evidence of protein diffusion into the interstitium (PubMed:32151560). Primarily expressed within the atrialis aspect of the anterior and posterior mitral leaflets with the highest signal present at the valve tip (PubMed:32151560). 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). Female mice homozygous for the Dhh gene are fully viable and fertile, whereas male mice are viable but infertile, owing to a complete absence of mature sperm (PubMed:8805249). Male mice exhibit a dramatic reduction in testicular growth (PubMed:8805249). The severity of the phenotype varies depending upon the genetic background of the mice (PubMed:8805249). The majority of the Dhh-null males are pseudohermaphrodites with a blind vaginal opening and evidence of teats. These mice show anastomotic seminiferous tubules, pertitubular cell abnormalities, and absence of adult-type Leydig cells (PubMed:11090455). Belongs to the hedgehog family.