Orthologues of nearly all of the core components of the Hedgehog signalling pathway, defined originally through genetic analysis in Drosophila,have now been discovered in vertebrates and shown to have highly conserved functions. The one striking exception to this rule is the kinesin-like protein Costal2, which plays a central role in controlling the activity of the zinc-finger-containing transcriptional regulator, Cubitus interruptus that modulates all Hedgehog-dependent target gene expression, but whose involvement in Hedgehog signalling has not been demonstrated in vertebrates. We report the cloning of a kinesin-related gene from the zebrafish that in structure as well as function, appears to represent the first vertebrate orthologue of costal2. Using a combination of genetic and biochemical analysis, we provide evidence that as in Drosophila, zebrafish Costal2 acts principally as an intracellular repressor of signal transduction, in conjunction with Suppressor of Fused, another protein that negatively regulates signalling in Hedgehog-responsive cells.