Background Desert hedgehog (DHH) gene variants are known to cause 46,XY differences/disorders of sex development (DSD). We have identified six patients with 46,XY DSD with seven novel DHH gene variants. Many of these variants were classified as variants of uncertain significance due to their heterozygosity or associated milder phenotype. To assess variant pathogenicity and to refine the spectrum of DSDs associated with this gene, we have carried out the first reported functional testing of DHH gene variant activity. Methods A cell co-culture method was used to assess DHH variant induction of Hedgehog signalling in cultured Leydig cells. Protein expression and subcellular localisation were also assessed for DHH variants using western blot and immunofluorescence. Results Our co-culture method provided a robust read-out of DHH gene variant activity, which correlated closely with patient phenotype severity. While biallelic DHH variants from patients with gonadal dysgenesis showed significant loss of activity, variants found as heterozygous in patients with milder phenotypes had no loss of activity when tested with a wild type allele. Taking these functional results into account improved clinical interpretation. Conclusion Our findings suggest heterozygous DHH gene variants are unlikely to cause DSD, reaffirming that DHH is an autosomal recessive cause of 46,XY gonadal dysgenesis. Functional characterisation of novel DHH variants improves variant interpretation, leading to greater confidence in patient reporting and clinical management.