G-protein-coupled receptor kinases (GRKs) play a conserved role in Hedgehog (Hh) signaling. In several systems, GRKs are required for efficient Hh target gene expression. Their principal target appears to be Smoothened (Smo), the intracellular signal-generating component of the pathway and a member of the G-protein-coupled receptor (GPCR) protein family. In Drosophila, a GRK called Gprk2 is needed for internalization and downregulation of activated Smo, consistent with the typical role of these kinases in negatively regulating GPCRs. However, Hh target gene activation is strongly impaired in gprk2 mutant flies, indicating that Gprk2 must also positively regulate Hh signaling at some level. To investigate its function in signaling, we analyzed several different readouts of Hh pathway activity in animals or cells lacking Gprk2. Surprisingly, although target gene expression was impaired, Smo-dependent activation of downstream components of the signaling pathway was increased in the absence of Gprk2. This suggests that Gprk2 does indeed play a role in terminating Smo signaling. However, loss of Gprk2 resulted in a decrease in cellular cAMP concentrations to a level that was limiting for Hh target gene activation. Normal expression of target genes was restored in gprk2 mutants by stimulating cAMP production or activating the cAMP-dependent Protein kinase A (Pka). Our results suggest that direct regulation of Smo by Gprk2 is not absolutely required for Hh target gene expression. Gprk2 is important for normal cAMP regulation, and thus has an indirect effect on the activity of Pka-regulated components of the Hh pathway, including Smo itself.