Function: Intercellular signal essential for a variety of patterning events during development. May function as a spermatocyte survival factor in the testes. Essential for testes development. Disease: Defects in DHH may be the cause of partial gonadal dysgenesis with minifascicular neuropathy 46,XY (PGD) [MIM:607080]. PGD is characterized by the presence of a testis on one side and a streak or an absent gonad at the other, persistence of Muellerian duct structures, and a variable degree of genital ambiguity. Defects in DHH may be the cause of complete pure gonadal dysgenesis 46,XY type (GDXYM) [MIM:233420]; also known as male-limited gonadal dysgenesis 46,XY. GDXYM is a type of hypogonadism in which no functional gonads are present to induce puberty in an externally female person whose karyotype is then found to be XY. The gonads are found to be non-functional streaks. Similarity: Belongs to the hedgehog family. PTM: The C-terminal domain displays an autoproteolysis activity and a cholesterol transferase activity. 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 (N-product). This covalent modification appears to play an essential role in restricting the spatial distribution of the protein activity to the cell surface. The N-product is the active species in both local and long-range signaling, whereas the C-product has no signaling activity.