Morphogens are molecules that spread from localized sites of production, specifying distinct cell outcomes at different concentrations. Members of the Hedgehog (Hh) family of signaling molecules act as morphogens in different developmental systems. If we are to understand how Hh elicits multiple responses in a temporally and spatially specific manner, the molecular mechanism of Hh gradient formation needs to be established. Moreover, understanding the mechanisms of Hh signaling is a central issue in biology, not only because of the role of Hh in morphogenesis, but also because of its involvement in a wide range of human diseases. Here, we review the mechanisms affecting the dynamics of Hh gradient formation, mostly in the context of Drosophila wing development, although parallel findings in vertebrate systems are also discussed.