Sonic Hedgehog is a secreted morphogen involved in patterning a wide range of structures in the developing embryo. Disruption of the Hedgehog signalling cascade leads to a number of developmental disorders and plays a key role in the formation of a range of human cancers. The identification of genes regulated by Hedgehog is crucial to understanding how disruption of this pathway leads to neoplastic transformation. We have used a Sonic Hedgehog (Shh) responsive mouse cell line, C3H/10T1/2, to provide a model system for hedgehog target gene discovery. Following activation of cell cultures with Shh, RNA was used to interrogate microarrays to investigate downstream transcriptional consequences of hedgehog stimulation. As a result 11 target genes have been identified, seven of which are induced (Thrombomodulin, GILZ, BF-2, Nr4a1, IGF2, PMP22, LASP1) and four of which are repressed (SFRP-1, SFRP-2, Mip1-γ, Amh) by Shh. These targets have a diverse range of putative functions and include transcriptional regulators and molecules known to be involved in regulating cell growth or apoptosis. The corroboration of genes previously implicated in hedgehog signalling, along with the finding of novel targets, demonstrates both the validity and power of the C3H/10T1/2 system for Shh target gene discovery.