Hedgehog (Hh) pathway plays multiple roles in many physiological processes and its dysregulation leads to congenital disorders and cancers. Hh regulates the cellular localization of Smoothened (Smo) and the stability of Cubitus interruptus (Ci) to fine-tune the signal outputs. However, the underlying mechanisms are still unclear. Here, we show that the scaffold protein Rack1 plays dual roles in Hh signaling. In the absence of Hh, Rack1 promotes Ci and Cos2 to form a Ci-Rack1-Cos2 complex, culminating in Slimb-mediated Ci proteolysis. In the presence of Hh, Rack1 dissociates from Ci-Rack1-Cos2 complex and forms a trimeric complex with Smo and Usp8, leading to Smo deubiquitination and cell surface accumulation. Furthermore, we find the regulation of Rack1 on Hh pathway is conserved from Drosophila to mammalian cells. Our findings demonstrate that Rack1 plays dual roles during Hh signal transduction and provide Rack1 as a potential drug target for Hh-related diseases.