The ubiquitin-like protein, Nedd8, covalently modifies members of the Cullin family. Cullins are the major components of a series of ubiquitin ligases that control the degradation of a broad range of proteins. We found that Nedd8 modifies Cul 1 in Drosophila. In Drosophila Nedd8 and Cul 1 mutants, protein levels of the signal transduction effectors, Cubitus nterruptus (Ci) and Armadillo (Arm), and the cell cycle regulator, Cyclin E (CycE), are highly accumulated, suggesting that the Cul I-based SCF complex requires Nedd8 modification for the degradation processes of Ci, Arm, and CycE in vivo. We further show that two distinct degradation mechanisms odulating Ci stability in the developing eye disc are separated by the morphogenetic furrow (MF) in which retinal differentiation is initiated. In cells anterior to the MF, Ci proteolytic processing promoted by PKA requires the activity of the Nedd8-modified Cull-based SCFslimb complex. In the posterior cells, Ci degradation is controlled by a mechanism that requires the activity of Cul 3, another member of the Cullin family. This posterior Ci degradation mechanism, which partially requires Nedd8 modification, is activated by hedgehog (Hh) signaling and PKA-independent.