Patched (Ptc) is a membrane protein whose function in Hedgehog (Hh) signal transduction has been conserved among metazoans and whose malfunction has been implicated in human cancers. Genetic analysis has shown that Ptc negatively regulates Hh signal transduction, but its activity and structure are not known. We investigated the functional and structural properties of Drosophila Ptc and its C-terminal domain (CTD), 183 residues that are predicted to reside in the cytoplasm. Our results show that Ptc, as well as truncated Ptc deleted of its CTD, forms a stable trimer. This observation is consistent with the proposal that Ptc is structurally similar to trimeric transporters. The CTD itself trimerizes and is required for both Ptc internalization and turnover. Two mutant forms of the CTD, one that disrupts trimerization and the other that mutates the target sequence of the Nedd4 ubiquitin ligase, stabilize Ptc but do not prevent internalization and sequestration of Hh. Ptc deleted of its CTD is stable and localizes to the plasma membrane. These data show that degradation of Ptc is regulated at a step subsequent to endocytosis, although endocytosis is a likely prerequisite. We also show that the CTD of mouse Ptc regulates turnover.