Description: Tom Stuckemann, Thomas Wegleiter, Eduard Stefan, Olivier Nagele, Katsiaryna Tarbashevich, Gunther Bock, Erez Raz, and Pia Aanstad The Hedgehog (Hh) pathway plays dual roles in proliferation and patterning during embryonic development, but the mechanism(s) that distinguish the mitogenic and patterning activities of Hh signalling are not fully understood. An additional level of complexity is provided by the observation that Hh signalling can both promote and inhibit cell proliferation. One model to account for this apparent paradox is that Hh signalling primarily regulates cell cycle kinetics, such that activation of Hh signalling promotes fast cycling and an earlier cell cycle exit. Here we report that activation of Hh signalling promotes endodermal cell proliferation but inhibits proliferation in neighbouring non-endodermal cells, suggesting that the cell cycle kinetics model is insufficient to account for the opposing proliferative responses to Hh signalling. We show that expression of the chemokine receptor Cxcr4a is a critical parameter that determines the proliferative response to Hh signalling, and that loss of Cxcr4a function attenuates the transcription of cell cycle regulator targets of Hh signalling without affecting general transcriptional targets. We show that Cxcr4a inhibits PKA activity independently of Hh signalling, and propose that Cxcr4a enhances Hh-dependent proliferation by promoting the activity of Gli1. Our results indicate that Cxcr4a is required for Hh-dependent cell proliferation but not for Hh-dependent patterning, and suggest that the parallel activation of Cxcr4a is required to modulate the Hh pathway to distinguish between patterning and proliferation.