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. Expressed in the marginal zone at early gastrulation. In the neurula, expression is restricted to anterior structures, encompassing both neural plate and endodermal cells. Expressed on the inner surface of the pharynx at the early tadpole stage. First expressed during early gastrulation. Expression peaks during neural induction and early organogenesis. 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.