ABSTRACT All morphogens of the Hedgehog (Hh) family are synthesized as dual-lipidated proteins, which results in their firm attachment to the surface of the cell in which they were produced. Thus, Hh release into the extracellular space requires accessory protein activities. We suggested previously that the proteolytic removal of N- and C-terminal lipidated peptides (shedding) could be one such activity. More recently, the secreted glycoprotein Scube2 (signal peptide, cubulin domain, epidermal-growth-factor-like protein 2) was also implicated in the release of Shh from the cell membrane. This activity strictly depended on the CUB domains of Scube2, which derive their name from the complement serine proteases and from bone morphogenetic protein-1/tolloid metalloproteinases (C1r/C1s, Uegf and Bmp1). CUB domains function as regulators of proteolytic activity in these proteins. This suggested that sheddases and Scube2 might cooperate in Shh release. Here, we confirm that sheddases and Scube2 act cooperatively to increase the pool of soluble bioactive Shh, and that Scube2-dependent morphogen release is unequivocally linked to the proteolytic processing of lipidated Shh termini, resulting in truncated soluble Shh. Thus, Scube2 proteins act as protease enhancers in this setting, revealing newly identified Scube2 functions in Hh signaling regulation.