Hedgehog signalling--an essential pathway during embryonic pancreatic development, the misregulation of which has been implicated in several forms of cancer--may also be an important mediator in human pancreatic carcinoma. Here we report that sonic hedgehog, a secreted hedgehog ligand, is abnormally expressed in pancreatic adenocarcinoma and its precursor lesions: pancreatic intraepithelial neoplasia (PanIN). Pancreata of Pdx-Shh mice (in which Shh is misexpressed in the pancreatic endoderm) develop abnormal tubular structures, a phenocopy of human PanIN-1 and -2. Moreover, these PanIN-like lesions also contain mutations in K-ras and overexpress HER-2/neu, which are genetic mutations found early in the progression of human pancreatic cancer. Furthermore, hedgehog signalling remains active in cell lines established from primary and metastatic pancreatic adenocarcinomas. Notably, inhibition of hedgehog signalling by cyclopamine induced apoptosis and blocked proliferation in a subset of the pancreatic cancer cell lines both in vitro and in vivo. These data suggest that this pathway may have an early and critical role in the genesis of this cancer, and that maintenance of hedgehog signalling is important for aberrant proliferation and tumorigenesis.