Hedgehog signaling is evolutionarily conserved and plays a pivotal role in cell fate determination, embryonic development, and tissue renewal. As aberrant Hedgehog signaling is tightly associated with a broad range of human diseases, its activities must be precisely controlled. It has been known that several core components of Hedgehog pathway undergo reversible phosphorylations mediated by protein kinases and phosphatases, which acts as an effective regulatory mechanism to modulate Hedgehog signal activities. In contrast to kinases that have been extensively studied in these phosphorylation events, phosphatases were thought to function in an unspecific manner, thus obtained much less emphasis in the past. However, in recent years, increasing evidence has implicated that phosphatases play crucial and specific roles in the context of developmental signaling, including Hedgehog signaling. In this review, we present a summary of current progress on phosphatase studies in Hedgehog pathway, emphasizing the multiple employments of protein serine/threonine phosphatases during the transduction of morphogenic Hedgehog signal in both Drosophila and vertebrate systems, all of which provide insights into the importance of phosphatases in the specific regulation of Hedgehog signaling