The Wdr34 gene encodes an intermediate chain of cytoplasmic dynein 2, the motor for retrograde intraflagellar transport (IFT) in primary cilia. Although mutations in human WDR34 have recently been reported, the association of WDR34 function with Hedgehog (Hh) signaling has not been established, and actual cilia defects in the WDR34 mutant cells have also not been completely characterized. In the present study, we show that Wdr34 mutant mice die in midgestation and exhibit open brain and polydactyly phenotypes. Several Hh-dependent ventral neural cell types are not specified in the mutant neural tube. The expression of the direct Hh targets, Gli1 and Patched 1, is inhibited, while the expression of limb patterning genes that are normally inhibited by the Gli3 repressor is anteriorly expanded in mutant limbs. Comparison of cilia phenotype and function among wild type, Dnchc2 (dynein 2 heavy chain), and Wdr34 mutant cells demonstrates that cilia in both Dnchc2 and Wdr34 mutant cells are stumpy. Several ciliary proteins examined abnormally accumulate in the cilia of both mutant cells. Consistent with its function, overexpressed Wdr34 is occasionally localized to cilia, and Wdr34 is required for the ciliary localization of dynein 2 light intermediate chain Lic3. More interestingly, we show that both Dnchc2 and Wdr34 act between Smo and Gli2/Gli3 in the Hh pathway. Therefore, like Dnchc2, Wdr34 is required for ciliogenesis, retrograde ciliary protein trafficking, and the regulation of Gli2/Gli3 activators and repressors. Furthermore, both Wdr34 and Dnchc2 promote microtubule growth, a novel dynein 2 function in a non-cilia structure.