The Hedgehog (Hh) signalling pathway plays a central role in regulating embryonic development and maintaining adult tissue homeostasis. To date, spatio-temporal regulation of Hh activity had been predominantly attributed to the negative regulatory activities of the Ptch1 protein receptor. However, we have recently shown that the rarely acknowledged mammalian Ptch2 paralogue plays an important role in regulating epidermal Hh pathway activity. More specifically, we identified that murine epidermis deficient in both Ptch1 and Ptch2 activity (K5Cre:Ptch1lox/lox;Ptch2tm1/tm1) results in a previously undescribed phenotype, namely complete inhibition of hair follicle, sebaceous gland and interfollicular lineage differentiation. Interestingly, we observed that follicular keratinocytes located at the base of embryonic wild-type hair follicles exhibit cellular characteristics indistinguishable from K5Cre:Ptch1lox/lox;Ptch2tm1/tm1 cells. These include loss of outer root sheath cell fate (keratin expression) and loss of intra-cellular adhesion (adherens junctions, tight junctions and desmosomes). Using single molecule fluorescent in situ hybridization (smFISH) technology, an mRNA detection method sensitive enough to detect single mRNA molecules followed by accurate quantification of the number of mRNA molecules per cell, we were able to detect a clear graded activity of Ptch1 and Gli1 expression along developing wild-type follicles. The highest level of Hh pathway activity is located at the base of the follicle and signaling activity tapers towards the skin’s surface. Interestingly, the quantified level of pathway activation present at the base of the follicle is identical to the level observed in K5Cre:Ptch1lox/lox;Ptch2tm1/tm1 keratinocytes. These data suggest that the genetic loss of Ptch1;Ptch2 accurately mimics the physiological level of pathway activity that occurs during follicular development and is thus the most appropriate model system to explore the molecular cues that occur in response to endogenous Hh ligand.