Basal cell carcinoma is the most prevalent cancer in the western world, showing a rapid increase in incidence. Activation of the Sonic hedgehog/Patched (PTCH) signaling pathway because of PTCH1 inactivation is a key event in sporadic and familial basal cell carcinoma development in humans and is associated with transcriptional activation of specific target genes, including PTCH1 itself. These changes are analogous to the situation in Drosophila where hedgehog activates the zinc-finger transcription factor Cubitus interruptus, leading to increased transcription of target genes. In the present study, we show that mice ectopically expressing the human Cubitus interruptus homolog GLI-1 in the skin develop tumors closely resembling human BCCs as well as other hair follicle-derived neoplasias, such as trichoepitheliomas, cylindromas, and trichoblastomas. Furthermore, examination of the tumors revealed wild-type p53 and Ha ras genes. These findings firmly establish that increased GLI-1 expression is central and probably sufficient for tumor development and suggest that GLI-1-induced tumor development does not depend on additional p53 or Ha ras mutations.