Sonic Hedgehog (Shh) is one of a family of three secreted proteins, including Indian Hedgehog (Ihh) and Desert Hedgehog (Dhh), that play distinct and crucial roles in development. The morphogenic signal Shh provides in the developing CNS induces proliferation of neuronal precursor cells in the developing cerebellum and other tissues. Proliferative signaling by Shh is involved in the development of cancer, including specific brain and skin cancers such as basal cell carcinomas, while activation of Shh signaling in neurons may also provide a means to induce neuronal regeneration. Mitogenic Shh signaling does not appear to involve Map kinase pathways, but may involve induction of Cyclin D1 expression to maintain Rb in the hyperphosphorylated state and allow progression through the G1 phase of the cell cycle. Activation of myc may be one mechanism by which Shh induces cell cycle progression. Activation of Shh proliferative signaling occurs through binding to a receptor complex including Patched (Ptc-1) and Smoothened, a G-protein coupled receptor. Patched is an integral membrane protein with twelve transmembrane domains that acts as an inhibitor of Smoothened activation. Patched has been classified as a tumor suppressor due to its inhibition of Smoothened and the presence of inactivated Ptc-1 mutations in some cancers. One possibility is that Ptc-1, which resembles transmembrane channels, may not directly associate with Smoothened but may repress Smoothened signaling by transporting an endogenous Smoothened inhibitor across the plasma membrane into the cytoplasm. Small non-peptidic agonists and antagonists of the Shh pathway have been identified and appear to act at the level of the Smoothened receptor, providing pharmacological tools to study Shh signaling. The pathway downstream of the Smoothened receptor has remained somewhat unclear, but involves the Gli family of transcriptional activators, including Gli-1, Gli-2, and Gli-3, homologs of the drosophila gene cubitis interruptis. Kinases including GSK-3 and PKA oppose activation of the Shh pathway, perhaps by regulating the stability of Shh pathway intermediate signaling factors transcription factors. Supressor of Fused (SUFU) interacts directly with Gli proteins, repressing Shh signaling while Dyrk1 is a kinase that acts by a distinct pathway to stimulate Gli1 activation of transcription. The multiplicity of factors involved in Shh signaling creates many opportunities for therapeutic intervention in the treatment of cancer and possibly neurodegenerative diseases.