Gli transcription factors function by binding to specific DNA sequences and regulating the transcription of target genes. In the context of the Hedgehog signaling pathway, the binding of Hedgehog ligands to the Patched receptor activates Smoothened, which then influences the activity of Gli proteins. Gli1 acts primarily as a transcriptional activator, Gli2 can function as both an activator and a repressor, and Gli3 mainly acts as a repressor.