Hedgehog (Hh) ligands act as morphogens to direct patterning and proliferation during embryonic development. Protein kinase A (PKA) is a central negative regulator of Hh signalling, and in the absence of Hh ligands, PKA activity prevents inappropriate expression of Hh target genes. The orphan G-protein-coupled receptor Gpr161 contributes to the basal Hh repression machinery by activating PKA. Gpr161 acts as an A-kinase-anchoring protein, and is itself phosphorylated by PKA, but the functional significance of PKA phosphorylation of Gpr161 in the context of Hh signalling remains unknown. Here, we show that loss of Gpr161 in zebrafish leads to constitutive activation of medium and low, but not maximal, levels of Hh target gene expression. Furthermore, we find that PKA phosphorylation-deficient forms of Gpr161, which we show directly couple to Gαs, display an increased sensitivity to Shh, resulting in excess high-level Hh signalling. Our results suggest that PKA feedback-mediated phosphorylation of Gpr161 may provide a mechanism for fine-tuning Gpr161 ciliary localisation and PKA activity.