The pathogenesis of pulmonary hypoplasia associated with congenital diaphragmatic hernia (CDH) is unknown. The sonic hedgehog (Shh) cascade is crucial for the patterning of the early respiratory system in mice. To establish whether Shh plays a role in the pathogenesis of lung hypoplasia in CDH, we investigated the gestation-specific expression of Shh in normal rat and human lungs using in situ hybridization and immunohistochemistry. The expression pattern was compared with that of age-matched samples of hypoplastic lungs associated with CDH in humans and in the 2,4-dichlorophenyl-p-nitrophenylether (nitrofen) rat model. Our results showed that in normal controls the expression of Shh increased with advancing gestation, peaked in the late pseudoglandular stage, and declined thereafter. The expression of Shh is initially down-regulated in pulmonary hypoplasia associated with CDH and peaks instead during the late canalicular stage. These data indicate that maximal expression of Shh occurs when respiratory bronchioles develop and thinning of the interstitium takes place, suggesting that Shh may play a role in these processes. Furthermore, we observed that Shh inhibited fetal lung fibroblast proliferation in vitro. Therefore, it is tempting to speculate that alterations in Shh expression may affect these developmental processes, thereby contributing to the pulmonary abnormality in CDH.