The Caenorhabditis elegans genome encodes ten proteins that share similarity with Hedgehog through the C-terminal Hint/Hog domain. While most genes are members of larger gene families, qua-1 is a single copy gene. Here we show that orthologs of qua-1 exist in many nematodes, including Brugia malayi, which shared a common ancestor with C. elegans about 300 million years ago. The QUA-1 proteins contain an N-terminal domain, the Qua domain, that is highly conserved, but whose molecular function is not known. We have studied the expression pattern of qua-1 in C. elegans using a qua-1::GFP transcriptional fusion. qua-1 is mainly expressed in hyp1 to hyp11 hypodermal cells, but not in seam cells. It is also expressed in intestinal and rectal cells, sensilla support cells, and the P cell lineage in L1. The expression of qua-1::GFP undergoes cyclical changes during development in phase with the molting cycle. It accumulates prior to molting and disappears between molts. Disruption of the qua-1 gene function through an internal deletion that causes a frame shift with premature stop in the middle of the gene results in strong lethality. The animals arrest in the early larval stages due to defects in molting. Electron microscopy reveals double cuticles due to defective ecdysis, but no obvious defects are seen in the hypodermis. Qua domain-only::GFP and full-length QUA-1::GFP fusion constructs are secreted and associated with the overlying cuticle, but only QUA-1::GFP rescues the mutant phenotype. Our results suggest that both the Hint/Hog domain and Qua domain are critically required for the function of QUA-1.