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Mutations affecting the transmembrane proteins Patched (Ptc) or Smoothened (Smo) that trigger ligand-independent activity of the Hedgehog (Hh) signalling pathway are associated with human tumours such as basal cell carcinoma (BCC) and medulloblastoma. Despite extensive genetic studies demonstrating the importance of these receptor components in embryonic patterning and cancer, the mechanism by which Ptc regulates Smo is not understood. Here we report that Ptc and Smo are not significantly associated within Hh-responsive cells. Furthermore, we show that free Ptc (unbound by Hh) acts sub-stoichiometrically to suppress Smo activity and thus is critical in specifying the level of pathway activity. Patched is a twelve-transmembrane protein with homology to bacterial proton-driven transmembrane molecular transporters; we demonstrate that the function of Ptc is impaired by alterations of residues that are conserved in and required for function of these bacterial transporters. These results suggest that the Ptc tumour suppressor functions normally as a transmembrane molecular transporter, which acts indirectly to inhibit Smo activity, possibly through changes in distribution or concentration of a small molecule.