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Overexpression of Hedgehog family proteins contributes to the aetiology of many cancers. To be highly active, Hedgehog proteins must be palmitoylated at their N-terminus by the MBOAT family multispanning membrane enzyme Hedgehog acyltransferase (Hhat). In a pancreatic ductal adenocarcinoma (PDAC) cell line PANC-1 and transfected HEK293a cells Hhat localized to the endoplasmic reticulum. siRNA knockdown showed that Hhat is required for Sonic hedgehog (Shh) palmitoylation, for its assembly into high molecular weight extracellular complexes and for functional activity. Hhat knockdown inhibited Hh autocrine and juxtacrine signaling, and inhibited PDAC cell growth and invasiveness in vitro. In addition, Hhat knockdown in a HEK293a cell line constitutively expressing Shh and A549 human non-small cell lung cancer cells inhibited their ability to signal in a juxtacrine/paracrine fashion to the reporter cell lines C3H10T1/2 and Shh-Light2. Our data identify Hhat as a key player in Hh-dependent signaling and tumour cell transformed behaviour.