Veratrum alkaloids and distal inhibitors of cholesterol biosynthesis have been studied for more than 30 years as potent teratogens capable of inducing cyclopia and other birth defects. Here, it is shown that these compounds specifically block the Sonic hedgehog (Shh) signaling pathway. These teratogens did not prevent the sterol modification of Shh during autoprocessing but rather inhibited the response of target tissues to Shh, possibly acting through the sterol sensing domain within the Patched protein regulator of Shh response.