Proteins of the Hedgehog, Wnt and Epidermal Growth Factor Receptor (EGFR) ligand families are secreted signals that induce concentration-dependent responses in surrounding cells. Although these proteins must diffuse through the aqueous extracellular environment, recent work has shown that hydrophobic lipid modifications are essential for their functions. All three classes of ligands are palmitoylated in the secretory pathway by related enzymes, and Hedgehog also carries a C-terminal cholesterol modification as a result of its autocatalytic cleavage. Palmitoylation is required for Wingless secretion and contributes to the signaling activity of Hedgehog and Wnt3a, but is not required for secretion or receptor activation by the EGFR ligand Spitz. While lipid modifications enhance the long-range activity of Sonic hedgehog, they restrict the range and increase the local concentration of Spitz. We discuss the diverse functions and the possible extent of palmitoylation of secreted ligands.