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The role of compartmentalized signaling in primary cilia during tissue morphogenesis is not well understood. The cilia localized G protein-coupled receptor, Gpr161, represses hedgehog pathway via cAMP signaling. We engineered a knock-in at the  Gpr161  locus in mice to generate a variant (Gpr161 mut1 ), which was ciliary localization defective but cAMP signaling competent. Tissue phenotypes from hedgehog signaling depend on downstream bifunctional Gli transcriptional factors functioning as activators or repressors. Compared to knockout (ko),  Gpr161 mut1/ko   had delayed embryonic lethality, moderately increased hedgehog targets, and partially down-regulated Gli3 repressor. Unlike ko, the  Gpr161 mut1/   ko  neural tube did not show Gli2 activator-dependent expansion of ventral-most progenitors. Instead, the intermediate neural tube showed progenitor expansion that depends on loss of Gli3 repressor. Increased extraciliary receptor levels in  Gpr161 mut1/mut1   prevented ventralization. Morphogenesis in limb buds and midface requires Gli repressor; these tissues in  Gpr161 mut1/mut1   manifested hedgehog hyperactivation phenotypes—polydactyly and midfacial widening. Thus, ciliary and extraciliary Gpr161 pools likely establish tissue-specific Gli repressor thresholds in determining morpho-phenotypic outcomes.

Ciliary and extraciliary Gpr161 pools repress hedgehog signaling in a tissue-specific manner