The hedgehog (Hh) pathway is conserved from Drosophila to humans and plays a key role in embryonic development. In addition, activation of the pathway in somatic cells contributes to cancer development in several tissues. Suppressor of fused is a negative regulator of Hh signaling. Targeted disruption of the murine suppressor of fused gene (Sufu) led to a phenotype that included neural tube defects and lethality at mid-gestation (9.0-10.5 dpc). This phenotype resembled that caused by loss of patched (Ptch1), another negative regulator of the Hh pathway. Consistent with this finding, Ptch1 and Sufu mutants displayed excess Hh signaling and resultant altered dorsoventral patterning of the neural tube. Sufu mutants also had abnormal cardiac looping, indicating a defect in the determination of left-right asymmetry. Marked expansion of nodal expression in 7.5 dpc embryos and variable degrees of node dysmorphology in 7.75 dpc embryos suggested that the pathogenesis of the cardiac developmental abnormalities was related to node development. Other mutants of the Hh pathway, such as Shh, Smo and Shh/Ihh compound mutants, also have laterality defects. In contrast to Ptch1 heterozygous mice, Sufu heterozygotes had no developmental defects and no apparent tumor predisposition. The resemblance of Sufu homozygotes to Ptch1 homozygotes is consistent with mouse Sufu being a conserved negative modulator of Hh signaling.