Mutations in the tumor suppressor gene PATCHED (PTC) are found in human patients with the basal cell nevus syndrome, a disease causing developmental defects and tumors, including basal cell carcinomas. Gene regulatory relationships defined in the fruit fly Drosophila suggest that overproduction of Sonic hedgehog (SHH), the ligand for PTC, will mimic loss of ptc function. It is shown here that transgenic mice overexpressing SHH in the skin develop many features of basal cell nevus syndrome, demonstrating that SHH is sufficient to induce basal cell carcinomas in mice. These data suggest that SHH may have a role in human tumorigenesis.