Essential for hedgehog signaling regulation: acts as both a negative and positive regulator of sonic hedgehog (Shh) and Indian hedgehog (Ihh) pathways; acting downstream of SMO; through both SUFU-dependent and -independent mechanisms (PubMed:21633164). Involved in the regulation of microtubular dynamics. Required for proper organization of the ciliary tip and control of ciliary localization of SUFU-GLI2 complexes (By similarity). Required for localization of GLI3 to cilia in response to Shh. Negatively regulates Shh signaling by preventing inappropriate activation of the transcriptional activator GLI2 in the absence of ligand. Positively regulates Shh signaling by preventing the processing of the transcription factor GLI3 into its repressor form. In keratinocytes; promotes the dissociation of SUFU-GLI2 complexes; GLI2 nuclear translocation and Shh signaling activation (By similarity). Involved in the regulation of epidermal differentiation and chondrocyte development (By similarity). {ECO:0000250; ECO:0000269|PubMed:21633164}.