Sonic Hedgehog (SHH) is a secreted morphogen that is an essential regulator of patterning and growth. The SHH protein requires cleavage of its full-length precursor (SHHFL) for secretion of biologically active SHH (SHHNp). Mutations in SHH that affect SHH processing are associated with human disease, which highlights the importance of processing for patterning in vivo. We identified Sortilin (SORT1), a member of the VPS10P receptor family, as a novel SHH interacting protein. SORT1 preferentially associates with SHHFL and SORT1 levels correlate inversely with cleavage of SHHFL. Consistent with an antagonistic relationship between SORT1 and SHH processing, loss of SORT1 results in an increase in SHH levels in axons and a partial rescue of Hedgehog-associated patterning defects in a mouse model of deficient SHH processing. Finally, we demonstrate a functional requirement for SORT1-mediated trafficking on SHH-dependent signaling from axons in the developing visual system in vivo. Our findings identify a novel role for SORT1 in the regulation of SHH processing and trafficking.