The penis is unique in that it undergoes morphogenesis and differentiation primarily in the postnatal period. For complex structures such as the penis to be made from undifferentiated precursor cells, proliferation, differentiation, and patterning are required. This process involves coordinated activity of multiple signals. Sonic hedgehog (Shh) forms part of a regulatory cascade that is essential for growth and morphogenesis of many tissues. It is hypothesized that the penis utilizes regulatory mechanisms similar to those of the limb and accessory sex organs to pattern penile postnatal morphogenesis and differentiation and that the Shh cascade is critical to this process. To test this hypothesis, Shh, BMP-4, Ptc, and Hoxa-10 localization and function were examined in Sprague-Dawley rat penes by means of quantitative reverse transcription polymerase chain reaction, in situ hybridization, immunohistochemistry, and Western blotting. These genes were expressed in the penis during postnatal morphogenesis in a spatially and temporally restricted manner in adjacent layers of the corpora cavernosal sinusoids. The function of Shh and BMP-4 is to establish and maintain corpora cavernosal sinusoids. The data suggest that Ptc and Hoxa-10 are also important in penile morphogenesis. The continuing function of Shh and targets of its signaling in maintaining penile homeostasis in the adult is significant because disruption of Shh signaling affects erectile function. This is the first report that demonstrates the significant role that Shh plays in establishing and maintaining penile homeostasis and how this relates to erectile function. These studies provide valuable insight that may be applied to improve treatment options for erectile dysfunction.