The GLI transcription factors mediate the hedgehog signal in development and carcinogenesis. Basal cell carcinoma can be caused by overexpression of either GLI1 or GLI2. Though GLI1 and GLI2 have identical or very similar DNA binding specificities, some of their activities are overlapping, some are clearly distinct. We analyzed target gene specificities of GLI1 and constitutively active GLI2 (GLI2DeltaN) by global expression profiling in an inducible, well-characterized HaCaT keratinocyte expression system. Four hundred fifty-six genes up- or downregulated at least twofold were identified. GLI target gene profiles correlated well with the biological activities of these transcription factors in hair follicles and basal cell carcinoma. Upregulation of largely overlapping sets of target genes was effected by both factors, repression occurred predominantly in response to GLI2. Also, significant quantitative differences in response to GLI1 and GLI2DeltaN were found for a small number of activated genes. Since we have not detected a putative processed GLI2 repressor, these results point to specific but indirect target gene repression by GLI2DeltaN via preferential activation of one or more negative regulators.