Smoothened (SMO) plays a key role in vertebrate hedgehog (Hh) signaling, which regulates patterning and proliferation in many tissues through three ligands: sonic (SHH), Indian and desert hedgehog. We have identified an autosomal recessive mutation in mouse Smo that causes impaired Hh signaling leading to defects in neural tube patterning and skeletal development. Our mutant, Smom1Tc (AW4), was isolated during a forward genetic N-ethyl-N-nitrosourea (ENU) screen. Using chromosome mapping and sequencing, we determined the mutation to be a conserved asparagine to lysine change at amino acid 223 of the SMO protein. Through analysis of the mutant embryos, we saw a moderate dorsalization of the neural tube, consistent with decreased SHH signaling. We isolated fibroblasts from the AW4 embryos and observed decreased levels of target gene transcription after treatment with SHH-conditioned media. Curiously, we saw no SMO enrichment in cilia upon SHH stimulation of AW4 fibroblasts, as occurs in wildtype cells. SMO is a seven-transmembrane G protein-coupled receptor with an extracellular binding pocket. The AW4 mutation, located in the extracellular domain of SMO, is likely to alter the binding pocket of SMO. While Smo-null mutants die at E9.0, the AW4 mutant embryos survive until birth – permitting examination of SMO-dependent skeletal development, with a particular focus on craniofacial and limb structure, both of which are abnormal beginning at embryonic day 10.5. The mutant midface and maxilla are both hypomorphic with a moderate collapse toward the midline, and the phalanges are short compared to wildtype embryos. Taken together, our results indicate AW4 is a hypomorphic Smo allele and suggest that ciliary SMO enrichment is not absolutely required for pathway activation.