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The hedgehog (Hh) family of genes, sonic hedgehog (Shh), Indian hedgehog (Ihh), and desert hedgehog (Dhh) encode signaling molecules that regulate multiple functions during organ development and in adult tissues. Altered hedgehog signaling has been implicated in disturbed organ development as well as in different degenerative and neoplastic human diseases. Hedgehog signaling plays an important role in determination the fate of the mesoderm of the gut tube, as well as in early pancreatic development, and islet cell function. Recently, it has been shown that deregulation of hedgehog signaling molecules contributes to the pathogenesis and progression of pancreatic cancer and of chronic pancreatitis. Inhibition of hedgehog signaling using hedgehog antagonists reduces pancreatic cancer cell growth in vitro and in vivo, thus holding promise of novel agents in the treatment of this devastating disease. In this review, we discuss the role of hedgehog signaling during pancreatic development, its role in the pathogenesis of both chronic pancreatitis and pancreatic cancer, and lastly, the implications of this newly available information with regards to treatment of pancreatic cancer.