Neurons are an important source of the secreted morphogen Sonic hedgehog (Shh), however, little is known about neuron-specific regulation of Shh transport and secretion. To study this process, we investigated the subcellular distribution of Shh in primary neurons and differentiated cells of a neuroendocrine cell line by fluorescence microscopy and biochemical fractionation. In retinal ganglion cells, endogenous Shh was distributed as intra- and extracellular puncta at the soma, dendrites, axons and neurite terminals. Shh(+) puncta move bidirectionally and colocalize with markers of synaptic vesicles (SVs) and dense core granules. Lipid modification and proteolysis were required for Shh sorting to SVs and cell surface association. Finally, consistent with its association with regulated secretory vesicles, Shh secretion could be induced under depolarizing conditions. Taken together, these observations suggest that long-range Shh transport and signalling in neurons involves trafficking to the regulated secretory pathway and cell surface accumulation of Shh on axons and suggests a link between neuronal activity and Shh release.