During embryonic development, protein kinase A (PKA) plays a key role in cell fate specification by antagonizing the Hedgehog (Hh) signaling pathway. However, the mechanism by which PKA activity is regulated remains unknown. Here we show that the Misty somites (Mys) protein regulates the level of PKA activity during embryonic development in zebrafish. We isolate PKA regulatory type I alpha subunit (Prkar1a) as a protein interacting with Mys by pulldown assay in HEK293 cells followed by mass spectrometry analysis. We show an interaction between endogenous Mys and Prkar1a in the zebrafish embryo. Mys binds to Prkar1a in its C terminus region, termed PRB domain, and activates PKA in vitro. Conversely, knockdown of Mys in zebrafish embryos results in reduction in PKA activity. We also show that knockdown of Mys induces ectopic activation of Hh target genes in the eyes, neural tube, and somites downstream of Smoothened, a protein essential for transduction of Hh signaling activity. The altered patterning of gene expression is rescued by activation of PKA. Together, our results reveal a molecular mechanism of regulation of PKA activity that is dependent on a protein-protein interaction and demonstrate that PKA activity regulated by Mys is indispensable for negative regulation of the Hh signaling pathway in Hh-responsive cells.