Cellular responses to the graded Sonic Hedgehog (Shh) morphogenic signal are orchestrated by three Gli genes that give rise to both transcription activators and repressors. An essential downstream regulator of the pathway, encoded by the tumor suppressor gene Suppressor of fused (Sufu), plays critical roles in the production, trafficking, and function of Gli proteins, but the mechanism remains controversial. Here, we show that Sufu is upregulated in active Shh responding tissues and accompanies Gli activators translocating into and Gli repressors out of the nucleus. Trafficking of Sufu to the primary cilium, potentiated by Gli activators but not repressors, was found to be coupled to its nuclear import. We have identified a nuclear export signal (NES) motif of Sufu in juxtaposition to the protein kinase A (PKA) and glycogen synthase kinase 3 (GSK3) dual phosphorylation sites and show that Sufu binds the chromatin with both Gli1 and Gli3. Close comparison of neural tube development among individual Ptch1^−/−, Sufu^−/−, and Ptch1^−/−; Sufu^−/− double mutant embryos indicates that Sufu is critical for the maximal activation of Shh signaling essential to the specification of the most-ventral neurons. These data define Sufu as a novel class of molecular chaperone required for every aspect of Gli regulation and function.