Hedgehog (Hh) signaling during embryogenesis and adult tissue homeostasis involves the activation of the oncoprotein Smoothened (Smo), but little is known about its mode of regulation. We attempt to identify proteins which regulate Smo function by performing a large-scale proteomic screen using Smo as the bait. We identify Dlg5 as a novel Smo-interacting protein whose association with Smo is triggered by Hh. Depletion of Dlg5 leads to global destabilization of Smo protein and concomitant reduced ciliary accumulation. We find that that Dlg5 localizes to the basal bodies in cultured cells, and our evidence further suggests that a Dlg5-scaffolded protein complex at the basal body is required to regulate Smo prior to Smo entry into the primary cilia.