Sonic hedgehog, Patched and Gli are components of a mammalian signalling pa
thway that has been conserved during evolution and which has a central role
in the control of pattern formation and cellular proliferation during deve
lopment. Here we identify the human Suppressor-of-Fused (SUFUH) complementa
ry DNA and show that the gene product interacts physically with the transcr
iptional effector GLI-1, can sequester GLI-1 in the cytoplasm, but can also
interact with GLI-1 on DNA. Functionally, SUFUH inhibits transcriptional a
ctivation by GLI-1, as well as osteogenic differentiation in response to si
gnalling from Sonic hedgehog. Localization of GLI-1 is influenced by the pr
esence of a nuclear-export signal, and GLI-1 becomes constitutively nuclear
when this signal is mutated or nuclear export is inhibited. These results
show that SUFUH is a conserved negative regulator of GLI-1 signalling that
may affect nuclear-cytoplasmic shuttling of GLI-1 or the activity of GLI-1
in the nucleus and thereby modulate cellular responses.