The Hedgehog (Hh) signaling pathway in vertebrates is regulated by the interaction of three key components: Sonic Hedgehog (Shh) ligand, its receptors Patched1 (Ptch1) and Patched2 (Ptch2), and the pathway activator Smoothened (Smo). Shh binding to Ptch1, the key Shh receptor, results in the release of Ptch1-mediated inhibition of Smo, leading to Smo activation and subsequent cell autonomous activation of the Shh response, with a similar but less important role for the Ptch1 paralog Ptch 2. Using genome editing I disrupted the core hedgehog pathway genes Ptch1, Ptch2, Smo, Shh in most combinations in mouse embryonic stem cells (mESCs). I differentiated these unique cell lines into neural tissue in which I interrogated mechanisms of Smo regulation by Ptch1 and Ptch2. I present an important role for Ptch2 as a cell-autonomous Smo regulator in the absence of Ptch1. I also demonstrate a role for Ptch1 and Ptch2 as non-cell autonomous Smo regulators, which I attribute to their efflux of a Smo inhibitory molecule into the extracellular space.