Proteoglycans, a class of carbohydrate-modified proteins, often modulate growth factor signaling on the cell surface. However, the molecular mechanism by which proteoglycans regulate signal transduction is largely unknown. In this study, using a recently developed glycoproteomic method, we found that Windpipe (Wdp) is a novel chondroitin sulfate proteoglycan (CSPG) in Drosophila. Wdp is a single-pass transmembrane protein with leucin-rich repeat (LRR) motifs and bears three CS sugar chain attachment sites in the extracellular domain. Here we show that Wdp modulates the Hedgehog (Hh) pathway. In the wing disc, overexpression of wdp inhibits Hh signaling, which is dependent on its CS chains and the LRR motifs. The wdp null mutant flies show a specific defect (supernumerary scutellar bristles) known to be caused by Hh overexpression. RNA interference knockdown and mutant clone analyses showed that loss of wdp leads to the up-regulation of Hh signaling. Altogether, our study demonstrates a novel role of CSPGs in regulating Hh signaling.