Gli proteins are transcriptional effectors of the Hedgehog (Hh) pathway in both normal development and cancer. We describe a program of multisite phosphorylation that regulates the conversion of Gli proteins into transcriptional activators. In the absence of Hh ligands, Gli activity is restrained by the direct phosphorylation of six conserved serine residues by protein kinase A (PKA), a master negative regulator of the Hh pathway. Activation of signaling leads to a global remodeling of the Gli phosphorylation landscape: the PKA target sites become dephosphorylated, while a second cluster of sites undergoes phosphorylation. The pattern of Gli phosphorylation can regulate Gli transcriptional activity in a graded fashion, suggesting a phosphorylation-based mechanism for how a gradient of Hh signaling in a morphogenetic field can be converted into a gradient of transcriptional activity.