Hedgehog (Hh) induces signaling by promoting the reciprocal trafficking of its receptor Patched (Ptc) and the signal transducer Smoothened (Smo), which is inhibited by Ptc, at the cell surface. We identified Smurf family E3 ubiquitin ligases as essential for Smo ubiquitylation and cell surface clearance and demonstrated that Smurf family members mediate the reciprocal trafficking of Ptc and Smo in Drosophila melanogaster G protein-coupled receptor kinase 2 (Gprk2)-mediated phosphorylation of Smurf promoted Smo ubiquitylation by increasing the recruitment of Smurf to Smo, whereas protein kinase A (PKA)-mediated phosphorylation of Smo caused Smurf to dissociate from Smo, thereby inhibiting Smo ubiquitylation. Smo and Ptc competed for the same pool of Smurf family E3 ubiquitin ligases, and Hh promoted Ptc ubiquitylation and degradation by disrupting the association of Smurf family E3 ubiquitin ligases with Smo and stimulating their binding to Ptc. Our study identifies the E3 ubiquitin ligases that target Smo and provides insight into how Hh regulates the reciprocal trafficking of its receptor and signal transducer.