The epithelial components of the mammary gland are thought to arise from stem cells with a capacity for self-renewal and multilineage differentiation. Furthermore, these cells and/or their immediate progeny may be targets for transformation. We have used both in vitro cultivation and a xenograft mouse model to examine the role of hedgehog signaling and Bmi-1 in regulating self-renewal of normal and malignant human mammary stem cells. We show that hedgehog signaling components PTCH1, Gli1, and Gli2 are highly expressed in normal human mammary stem/progenitor cells cultured as mammospheres and that these genes are down-regulated when cells are induced to differentiate. Activation of hedgehog signaling increases mammosphere-initiating cell number and mammosphere size, whereas inhibition of the pathway results in a reduction of these effects. These effects are mediated by the polycomb gene Bmi-1. Overexpression of Gli2 in mammosphere-initiating cells results in the production of ductal hyperplasia, and modulation of Bmi-1 expression in mammosphere-initiating cells alters mammary development in a humanized nonobese diabetic-severe combined immunodeficient mouse model. Furthermore, we show that the hedgehog signaling pathway is activated in human breast "cancer stem cells" characterized as CD44+CD24-/lowLin-. These studies support a cancer stem cell model in which the hedgehog pathway and Bmi-1 play important roles in regulating self-renewal of normal and tumorigenic human mammary stem cells.