Hedgehog (Hh) signaling culminates in the conversion of the latent transcription factor Cubitus interruptus (Ci)/Gli into its activator form (CiA/GliA), but the underlying mechanism remains poorly understood. Here, we demonstrate that Hh stimulates the phosphorylation of Ci by the Ser/Thr kinase Fused (Fu) and that Fu-mediated phosphorylation of Ci promotes its activation. We find that Fu directly phosphorylates Ci on Ser218 and Ser1230, which primes its further phosphorylation by CK1 on adjacent sties. These phosphorylation events alter Ci binding to the pathway inhibitor Suppressor of fused (Sufu) and facilitate the recruitment of Transportion and the transcriptional coactivator CBP. Furthermore, we provide evidence that Sonic hedgehog (Shh) activates Gli2 by stimulating its phosphorylation on conserved sites through the Fu-family kinases ULK3 and mFu/STK36 in a manner depending on Gli2 ciliary localization. Hence, Fu-family kinase-mediated phosphorylation of Ci/Gli serves as a conserved mechanism that activates the Hh pathway transcription factor.