It has long been known that the overexpression of either Wnt-1 or the GLI proteins results in cancer; however, the molecular basis for this transformation was poorly understood. The Wnt-1 and GLI proteins have now been placed in a signaling cascade downstream of the mammalian homologs of the Drosophila hedgehog and patched proteins. The Drosophila segment polarity gene hedgehog (hh) encodes a secreted protein that appears to function in embryonic and imaginal disc patterning. The ptc gene, also identified as a Drosophila segment polarity gene, encodes the transmembrane protein patched, the expression of which is precisely regulated during embryonic development. Hedgehog has been shown to enhance the expression of the Wnt family of proteins through a signaling cascade involving the GLI transcription factors, while patched functions as a repressor opposing the effects of hedgehog. Mutations in the ptc gene, which result in unregulated hedgehog signaling, have been correlated with the most common type of cancer, basal cell carcinoma, which affects 750,000 individuals annually in the United States alone.