Hedgehog (Hh) signaling is driven by the cholesterol-modified Hh ligand, generated by autoprocessing of Hh precursor protein. Two steps in Hh autoprocessing, N-S acyl shift and transesterification, must be coupled for efficient Hh cholesteroylation and downstream signal transduction. In the present study, we show that a conserved aspartate residue, D46 of the Hh autoprocessing domain, coordinates these two catalytic steps. Mutagenesis demonstrated that D46 suppresses non-native Hh precursor autoprocessing and is indispensable for transesterification with cholesterol. NMR measurements indicated that D46 has pK(a) of 5.6, similar to 2 units above the expected pKa Of aspartate, due to a hydrogen-bond between protonated D46 and a catalytic cysteine residue. However, the deprotonated form of D46 side chain is also essential, because a D46N mutation cannot mediate cholesteroylation. On the basis of these data, we propose that the proton shuttling of D46 side chain mechanistically couples the two steps of Hh cholesteroylation.