Hedgehog (Hh) proteins are important components of signal transduction pathways involved in animal development, and their defects are implicated in carcinogenesis. Their N‐terminal domain (HhN) acts as a signaling ligand, and their C‐terminal domain (HhC) performs an autocatalytic function of cleaving itself away, while adding a cholesterol moiety to HhN. HhC has two sub‐domains: a hedgehog/intein (hint) domain that primarily performs the autocatalytic activity, and a sterol‐recognition region (SRR) that binds to cholesterol and properly positions it with respect to HhN. The three‐dimensional details of this autocatalytic mechanism remain unknown, as does the structure of the precursor Hh protein. In this study, a complete cholesterol‐bound precursor form of the drosophila Hh precursor is modeled using known crystal structures of HhN and the hint domain, and a hypothesized similarity of SRR to an unrelated but similar‐sized cholesterol binding protein. The restrained geometries and topology switching (RGATS) strategy is then used to predict atomic‐detail pathways for the full autocatalytic reaction starting from the precursor and ending in a cholesterol‐linked HhN domain and a cleaved HhC domain. The RGATS explicit solvent simulations indicate the roles of individual HhC residues in facilitating the reaction, which can be confirmed through mutational experiments. These simulations also provide plausible structural models for the N/S acyl transfer intermediate and the product states of this reaction. This study thus provides a good framework for future computational and experimental studies to develop a full structural and dynamic understanding of Hh autoprocessing. © 2019 Wiley Periodicals, Inc.