Hedgehog (Hh) signaling plays a central role in development and diseases. Hh activates its signal transducer and GPCR-family protein Smoothened (Smo) by inducing Smo phosphorylation, but whether Smo is activated through other post-translational modifications remains unexplored. Here we show that sumoylation acts in parallel with phosphorylation to promote Smo cell-surface expression and Hh signaling. We find that Hh stimulates Smo sumoylation by dissociating it from a desumoylation enzyme Ulp1. Sumoylation of Smo in turn recruits a deubiquitinase UBPY/USP8 to antagonize Smo ubiquitination and degradation, leading to its cell-surface accumulation and elevated Hh pathway activity. We also provide evidence that Shh stimulates sumoylation of mammalian Smo (mSmo) and that sumoylation promotes ciliary localization of mSmo and Shh pathway activity. Our findings reveal a conserved mechanism whereby the SUMO pathway promotes Hh signaling by regulating Smo subcellular localization and shed light on how sumoylation regulates membrane protein trafficking.