Graded Hedgehog (Hh) signaling is mediated by graded Cubitus interruptus (Ci)/Gli transcriptional activity, but how the Hh gradient is converted into the Ci/Gli activity gradient remains poorly understood. Here, we show that graded Hh induces a progressive increase in Ci phosphorylation at multiple Fused (Fu)/CK1 sites including a cluster located in the C-terminal Sufu-binding domain. We demonstrated that Fu directly phosphorylated Ci on S1382, priming CK1 phosphorylation on adjacent sites, and that Fu/CK1-mediated phosphorylation of the C-terminal sites interfered with Sufu binding and facilitated Ci activation. Phosphorylation at the N-terminal, middle, and C-terminal Fu/CK1 sites occurred independently of one another and each increased progressively in response to increasing levels of Hh or increasing amounts of Hh exposure time. Increasing the number of phospho-mimetic mutations of Fu/CK1 sites resulted in progressively increased Ci activation by alleviating Sufu-mediated inhibition. We found that the C-terminal Fu/CK1 phosphorylation cluster is conserved in Gli2 and contributes to its dose-dependent activation. Our study suggests that the Hh signaling gradient is translated into a Ci/Gli phosphorylation gradient that activates Ci/Gli by gradually releasing Sufu-mediated inhibition.