The Hedgehog (HH) signaling pathway is crucial for the development of many organisms and its inappropriate activation is involved in numerous cancers. HH signal controls the traffic and activity of the seven-pass transmembrane protein Smoothened (SMO), leading to the transcriptional regulation of HH-responsive genes. In Drosophila, the intracellular transduction events following SMO activation depend on cytoplasmic multimeric complexes that include the Fused (FU) protein kinase. Here we show that the regulatory domain of FU physically interacts with the last 52 amino acids of SMO and that the two proteins colocalize in vivo to vesicles. The deletion of this region of SMO leads to a constitutive activation of SMO, promoting the ectopic transcription of HH target genes. This activation is partially dependent of FU activity. Thus, we identify a novel link between SMO and the cytoplasmic complex(es) and reveal a negative role of the SMO C-terminal region that interacts with FU. We propose that FU could act as a switch, activator in presence of HH signal or inhibitor in absence of HH.