Sonic Hedgehog (Shh) signaling is crucial for growth, cell fate determination, and axonal guidance in the developing nervous system. Although the receptors Patched (Ptch1) and Smoothened (Smo) are required for Shh signaling, a number of distinct co-receptors contribute to these critical responses to Shh. Several membrane-embedded proteins such as Boc, Cdo, and Gas1 bind Shh and promote signaling. In addition, heparan sulfate proteoglycans (HSPGs) have also been implicated in the initiation of Shh responses. However, the attributes of HSPGs that function as co-receptors for Shh have not yet been defined. Here, we identify HSPGs containing a glypican 5 core protein and 2-O-sulfo-iduronic acid residues at the nonreducing ends of the glycans as co-receptors for Shh. These HSPG co-receptors are expressed by cerebellar granule cell precursors and promote Shh binding and signaling. At the subcellular level, these HSPG co-receptors are located adjacent to the primary cilia that act as Shh signaling organelles. Thus, Shh binds to HSPG co-receptors containing a glypican 5 core and 2-O-sulfo-iduronic acid to promote neural precursor proliferation.