The Hedgehog (Hh) pathway is evolutionarily conserved and plays critical roles during embryonic development and adult tissue homeostasis. Defective Hh signaling has been linked to a wide range of birth defects and cancers. Hh family proteins regulate the expression of their downstream target genes through the control of proteolytic processing and the transcriptional activation function of Gli transcription factors. Although Hh-dependent regulation of Gli has been studied extensively, other Gli regulatory mechanisms remain relatively unappreciated. Here we report our identification of a novel signaling cascade that controls the stability of Gli proteins. This cascade consists of Daz interacting protein 1 (Dzip1), casein kinase 2 (CK2), and B56 containing protein phosphatase 2As (PP2As). We provide evidence that Dzip1 is involved in a novel Gli turnover pathway. We show that CK2 directly phosphorylates Dzip1 at four serine residues, Ser-664/665/706/714. B56-containing PP2As, through binding to a domain located between amino acid residue 474 and 550 of Dzip1, dephosphorylate Dzip1 on these CK2 sites. Our mutagenesis analysis further demonstrates that the unphosphorylatable form of Dzip1 is more potent in promoting Gli turnover. Consistently, we found that the stability of Gli proteins was decreased upon CK2 inhibition and increased by inhibition of B56-containing PP2As. Thus, reversible phosphorylation of Dzip1, which is controlled by the antagonistic action of CK2 and B56-containing PP2As, has an important impact on the stability of Gli transcription factors and Hh signaling.