Hedgehog (Hh) molecules play critical roles during development as a morphogen, and therefore their distribution must be regulated. Hh proteins undergo several modifications that tether them to the membrane. We have previously identified tout velu (ttv), a homolog of the mammalian EXT tumor suppressor gene family, as a gene required for movement of Hh. In this paper, we present in vivo evidence that ttv is involved in heparan sulfate proteoglycan (HSPG) biosynthesis, suggesting that HSPGs control Hh distribution. In contrast to mutants in other HSPG biosynthesis genes, the activity of the HSPG-dependent FGF and Wingless signaling pathways are not affected in ttv mutants. This demonstrates an unexpected level of specificity in the regulation of the distribution of extracellular signals by HSPGs.