The hedgehog signalling pathway plays a vital role in Drosophila embryonic patterning and development. Hedgehog is a secreted protein, unrelated to classical growth factors, which seems to form concentration gradients across those tissues involved in pattern formation. Cloning of vertebrate homologues of hedgehog and other genes has illustrated the remarkable conservation of function of this pathway throughout evolution. The human homologue of patched, a receptor for the hedgehog protein, was cloned as the gene responsible for naevoid basal cell carcinoma syndrome (NBCCS/‘Gorlin Syndrome’), an autosomal dominant condition in which patients suffer from multiple basal cell carcinomas and a wide spectrum of developmental abnormalities. Its role as a tumour suppressor gene in both NBCCS and sporadic basal cell carcinoma led to the suggestion that mutation or inactivation of human patched may be an essential step in development of basal cell carcinomas and other skin tumours. This review describes our current understanding of hedgehog signalling in Drosophila and vertebrates and its relation to the development of human basal cell carcinoma and other skin tumours, together with a discussion of future avenues of research into this critical and intriguing pathway.