Nature provides a number of mechanisms to encode dynamic information in biomolecules. In metazoans, there exist rare chemical modifications that occur through entirely unique mechanistic regimes. One such example occurs in the Hedgehog (Hh) morphogens, proteins singular across all domains of life for the nature of their covalent ligation to cholesterol. The isoform- and context-specific efficiency of the ligation reaction has profound impact on the activity of Hh morphogens and represents an unexplored aspect of Hh ligand-dependent cancers. To elucidate the chemical mechanism of this modification, we have defined roles of the uncharacterized sterol recognition region (SRR) in Hh proteins. We use a combination of sequence conservation, directed mutagenesis, and biochemical assays to specify residues of the SRR that are responsible for cellular and biochemical processes in Hh cholesterolysis. Our investigations offer the first functional template of this region, providing opportunities to identify parallel reactivity in nature and revealing new mechanisms that can be exploited as tools in chemical biology.