The morphogen Sonic hedgehog, one of the Hedgehog (Hh) family of secreted proteins, plays a key role in patterning the mammalian spinal cord along its dorsoventral (D/V) axis through the activation of Glioma-associated oncogene (Gli) family of transcription factors. Suppressor of Fused (Sufu), a Gli-interacting protein, modulates the D/V patterning of the spinal cord by antagonizing Hh signaling. The molecular mechanisms underlying the function of Sufu in Hh pathway activation and spinal cord D/V patterning remain controversial, particularly in light of recent findings that Sufu protects Gli2 and Gli3 proteins from proteasomal degradation. In the current study, we show that Hh pathway activation and dorsal expansion of ventral spinal cord cell types in the absence of Sufu depend on the activator activities of all three Gli family proteins. We also show that Sufu plays a positive role in the maximal activation of Hh signaling that defines the ventral-most cell fate in the mammalian spinal cord, likely through protecting Gli2 and Gli3 proteins from degradation. Finally, by altering the level of Gli3 repressor on a background of reduced Gli activator activities, we reveal an important contribution of Gli3 repressor activity to the Hh pathway activation and the D/V patterning of the spinal cord.