Hedgehog (Hh) as morphogen directs cell differentiation during development activating various target genes in a concentration dependent manner. The mechanisms that permit controlled Hh dispersion and gradient formation remain controversial. New research in the Drosophila wing disc epithelium has revealed a crucial role of Hh recycling for its release and transportation from source cells. Lipid modifications on Hh mediate key interactions with different elements of the pathway, which balance the retention and release of the molecule through the basolateral side of the epithelium, allowing its tight spatial control. Dispersion of Hh is also determined by its hydrophobic nature, and the mechanisms that include membrane-tethered transport of Hh are increasingly proposed.