Holoprosencephaly (HPE) is a common forebrain malformation associated with mental retardation and craniofacial anomalies. Multiple lines of evidence indicate that loss of ventral neurons is associated with HPE. The condition is etiologically heterogeneous, and abnormalities in any of several genes can cause human HPE. Among these genes, mutations in SONIC HEDGEHOG ( SHH) are the most commonly identified single gene defect causing human HPE. SHH mediates a number of processes in central nervous system development and is required for the normal induction of ventral cell types in the brain and spinal cord. Although a number of missense mutations in SHH have been identified in patients with HPE, the functional significance of these mutations has not yet been determined. We demonstrate that two SHH mutations that cause human HPE result in decreased in vivo activity of SHH in the developing nervous system. These mutant forms of SHH fail to regulate genes properly that are normally responsive to SHH signaling and do not induce ventrally expressed genes. In addition, the immunoreactivity of the mutant proteins is altered, suggesting that the conformation of the SHH protein has been disrupted. These studies are the first demonstration that mutations in SHH associated with human HPE perturb the in vivo patterning function of SHH in the developing nervous system.