The Hedgehog (Hh) signaling pathway plays an important role in prostate development and appears to play an equally important role in promoting growth of advanced prostate cancer. During prostate development, epithelial cells in the urogenital sinus (UGS) express Sonic Hedgehog (Shh) and secrete Shh peptide. The secreted Hh peptide acts on adjacent mesenchymal cells to activate the Hh signal transduction pathway and elicit paracrine effects on epithelial proliferation and differentiation. To identify mesenchymal targets of Shh signaling, we performed microarray analysis on a Shh-responsive, immortalized urogential sinus mesenchymal cell line. We found 68 genes that were up-regulated by Shh and 21 genes that were down-regulated. Eighteen of those were selected for further study with Ptc1 and Gli1 serving as reference controls. We found 10 of 18 were also Hh-regulated in primary UGS mesenchymal cells and 13 of 18 in the cultured UGS. Seven of 18 exhibited Shh-regulated expression in both assays (Igfbp-6, Igfbp-3, Fbn2, Ntrk3, Agpt4, Dmp1, and Mmp13). Three of the 18 genes contained putative Gli binding motifs that bound Gli1 peptide in electrophoretic mobility shift assays. With the exception of Tiam1, target gene expression generally showed no differences in the concentration dependence of ligand-induced expression, but we observed strikingly different responses to direct pathway activation by transfection with activated Smo, Gli1, and Gli2.