Oxysterols are a class of endogenous signaling molecules that can activate the Hedgehog pathway, which has critical roles in development, regeneration and cancer. However, it has been unclear how oxysterols influence Hedgehog signaling, including whether their effects are mediated through a protein target or indirectly through effects on membrane properties. To answer this question, we synthesized the enantiomer and an epimer of the most potent oxysterol, 20(S)-hydroxycholesterol. Using these molecules, we show that the effects of oxysterols on Hedgehog signaling are exquisitely stereoselective, consistent with the hypothesis that they function through a specific protein target. We present several lines of evidence that this protein target is the seven-pass transmembrane protein Smoothened, a major drug target in oncology. Our work suggests that these enigmatic sterols, which have multiple effects on cell physiology, may act as ligands for signaling receptors and provides a generally applicable framework for probing sterol signaling mechanisms.