The Hedgehog (Hh) pathway is activated in some human cancers, including medulloblastoma. The glioma-associated oncogene homolog (GLI) transcription factors are critical mediators of the activated Hh pathway, and their expression may be elevated in some tumors independent of upstream Hh signaling. Thus, therapies targeting GLI transcription factors may benefit a wide spectrum of patients with mutations at different nodal points of the Hh pathway. In this study, we present evidence that arsenic trioxide (ATO) suppresses human cancer cell growth and tumor development in mice by inhibiting GLI1. Mechanistically, ATO directly bound to GLI1 protein, inhibited its transcriptional activity, and decreased expression of endogenous GLI target genes. Consistent with this, ATO inhibited the growth of human cancer cell lines that depended on upregulated GLI expression in vitro and in vivo in a xenograft model of Ewing sarcoma. Furthermore, ATO improved survival of a clinically relevant spontaneous mouse model of medulloblastoma with activated Hh pathway signaling. Our results establish ATO as a Hh pathway inhibitor acting at the level of GLI1 both in vitro and in vivo. These results warrant the clinical investigation of ATO for tumors with activated Hh/GLI signaling, in particular patients who develop resistance to current therapies targeting the Hh pathway upstream of GLI.