Background: The modern coelacanth (Latimeria) is the extant taxon of a basal sarcopterygian lineage and sister group to tetrapods. Apart from certain apomorphic traits, its morphology is characterized by a high degree of retention of ancestral vertebrate structures and little morphological change. An insight into the molecular evolution that may explain the unchanged character of Latimeria morphology requires the analysis of the expression patterns of developmental regulator genes and their cis-regulatory modules (CRMs). Results: We describe the comparative and functional analysis of the sonic hedgehog (shh) genomic region of Latimeria menadoensis. Several putative enhancers in the Latimeria shh locus have been identified by comparisons to sarcopterygian and actinopterygian extant species. Specific sequence conservation with all known actinopterygian enhancer elements has been detected. However, these elements are selectively missing in more recently diverged actinopterygian and sarcopterygian species. The functionality of the putative Latimeria enhancers was confirmed by reporter gene expression analysis in transient transgenic zebrafish and chick embryos. Conclusions: Latimeria shh CRMs represent the ancestral set of enhancers that have emerged before the split of lobe-finned and ray-finned fishes. In contrast to lineage-specific losses and differentiations in more derived lineages, Latimeria shh enhancers reveal low levels of sequence diversification. High overall sequence conservation of shh conserved noncoding elements (CNE) is consistent with the general trend of high levels of conservation of noncoding DNA in the slowly evolving Latimeria genome. ; This project was supported by EUTRACC and Transcode of the EU Framework programmes (contracts 511990 and LSGH CT 2006037445 and by the Deutsche Forschungsgemeinschaft (MU1768/2)). U. S. was supported by EC IPs ZF-Models and Eutracc and the Helmholtz Association. C. T. A. was supported by grants from the National Science Foundation (IBN-0321461, MCB-0719558). A. M. was supported by grants from the Deutsche Forschungsgemeinschaft.