The mammalian Sonic hedgehog (Shh) signalling pathway is essential for embryonic development and the patterning of multiple organs. Disruption or activation of Shh signalling leads to multiple birth defects, including holoprosencephaly, neural tube defects and polydactyly, and in adults results in tumours of the skin or central nervous system. Genetic approaches with model organisms continue to identify novel components of the pathway, including key molecules that function as positive or negative regulators of Shh signalling. Data presented here define Tulp3 as a novel negative regulator of the Shh pathway. We have identified a new mouse mutant that is a strongly hypomorphic allele of Tulp3 and which exhibits expansion of ventral markers in the caudal spinal cord, as well as neural tube defects and preaxial polydactyly, consistent with increased Shh signalling. We demonstrate that Tulp3 acts genetically downstream of Shh and Smoothened (Smo) in neural tube patterning and exhibits a genetic interaction with Gli3 in limb development. We show that Tulp3 does not appear to alter expression or processing of Gli3, and we demonstrate that transcriptional regulation of other negative regulators (Rab23, Fkbp8, Thm1, Sufu and PKA) is not affected. We discuss the possible mechanism of action of Tulp3 in Shh-mediated signalling in light of these new data.