The hedgehog pathway regulates epithelial-mesenchymal interactions, differentiation, proliferation and survival during development. Stimulation of hedgehog signaling induces carcinogenesis or promotes cell survival in cancers of multiple organs. Using real-time, quantitative PCR, laser capture microdissection, and immunohistochemistry, distinctive patterns of expression of the hedgehog pathway members patched 1 (PTCH1), smoothened, GLI1, GLI2 and the 3 hedgehog ligands were identified for epithelial cells and stromal fibroblasts in benign breast and breast cancer. Hedgehog ligands were expressed at higher levels in some cancer epithelial cell lines compared to noncancerous epithelial cells. Correspondingly, expression of GLI1, a transcription factor and transcriptional product of hedgehog signaling, was increased 8-fold in cancer epithelial cell lines; however, PTCH1, also a transcriptional target of hedgehog signaling in many cell types, was not increased. GLI1 protein and mRNA, and PTCH1 and sonic hedgehog (SHH) proteins were elevated in 3 of 10 breast cancers; however, PTCH1 transcripts were not consistently increased. Hedgehog-mediated transcription, as indicated by a reporter of GLI-dependent promoter activity and by expression of GLI1 transcripts, was reduced by the hedgehog pathway inhibitor cyclopamine in both MDA-MB-435 cancer epithelial cells and MCF10AT epithelial cells, a cell line derived from benign breast. However, cyclopamine reduced viability of cancer epithelial cell lines, including MDA-MB-435, but did not specifically affect fibroblasts or epithelial cells from benign breast, including MCF10AT. Treatment with sonic hedgehog ligand diminished the cyclopamine-induced reduction in GLI-dependent promoter activity in MCF10AT and MDA-MB-435 and viability of MDA-MB-435. These results demonstrate modulation of GLI-mediated transcription in both cancer and benign-derived epithelial cells by cyclopamine and sonic hedgehog, and further suggest that hedgehog signaling contributes to the survival of only the cancer epithelial cells. Determination as to whether the increase in GLI1 and SHH expression in breast cancer indicates a significant increase in hedgehog signaling will require further evaluation.