The Drosophila hedgehog (hh) gene encodes a secreted protein involved in organizing growth and patterning in many developmental processes. Hh appears to act by inducing the localized expression of at least two other signaling molecules, decapentaplegic (dpp) and wingless (wg), which then govern cell proliferation and patterning in surrounding tissue. Here, we demonstrate that cyclic AMP (cAMP)-dependent protein kinase A (PKA) is essential during limb development to prevent inappropriate dpp and wg expression. We also show that a constitutively active form of PKA can prevent inappropriate dpp and wg expression, but does not interfere with their normal induction by hh. We propose that the basal activity of PKA imposes a block on the transcription of dpp and wg and that hh exerts its organizing influence by alleviating this block.