Evolutionarily conserved hedgehog proteins orchestrate the patterning of embryonic tissues, and dysfunctions in their signaling can lead to tumorigenesis. In vertebrates, Sonic hedgehog (Shh) is essential for nervous system development, but the mechanisms underlying its action remain unclear. Early electrical activity is another developmental cue important for proliferation, migration, and differentiation of neurons. Here we demonstrate the interplay between Shh signaling and Ca2+ dynamics in the developing spinal cord. Ca2+ imaging of embryonic spinal cells shows that Shh acutely increases Ca2+ spike activity through activation of the Shh coreceptor Smoothened (Smo) in neurons. Smo recruits a heterotrimeric GTP-binding protein-dependent pathway and engages both intracellular Ca2+ stores and Ca2+ influx. The dynamics of this signaling are manifested in synchronous Ca2+ spikes and inositol triphosphate transients apparent at the neuronal primary cilium. Interaction of Shh and electrical activity modulates neurotransmitter phenotype expression in spinal neurons. These results indicate that electrical activity and second-messenger signaling mediate Shh action in embryonic spinal neurons.