Activation of the hedgehog pathway, through the loss of patched (PTC) or the activation of smoothened (SMO), occurs frequently in basal cell carcinoma (BCC), the most common human cancer. However, the molecular basis of this neoplastic effect is not understood. The downstream molecule Gli1 is known to mediate the biological effect of the pathway and is itself up-regulated in all BCCs. Gli1 can drive the production of BCCs in the mouse when overexpressed in the epidermis. Here we show that Gli1 can activate platelet-derived growth factor receptor alpha (PDGFRalpha) in C3H10T(1/2) cells. Functional up-regulation of PDGFRalpha by Gli1 is accompanied by activation of the ras-ERK pathway, a pathway associated with cell proliferation. The relevance of this mechanism in vivo is supported by a high level expression of PDGFRalpha in BCCs of mice and humans. In the murine BCC cell line ASZ001, in which both copies of the PTC gene are inactivated, DNA synthesis and cell proliferation can be slowed by re-expression of PTC, which down-regulates PDGFRalpha expression, or by downstream inhibition of PDGFRalpha with neutralizing antibodies. Therefore, we conclude that increased expression of PDGFRalpha may be an important mechanism by which mutations in the hedgehog pathway cause BCCs.