In contrast to the mammalian retina, the zebrafish retina possesses the ability to regenerate. This is primarily accomplished through Müller glial cells, which, upon damage, re-enter the cell cycle to form retinal progenitors. The progenitors continue to proliferate as they migrate to the area of damage and ultimately differentiate into new neurons. The purpose of this study was to characterize the expression and function of Sonic Hedgehog (Shh) during regeneration of the adult zebrafish retina. Expression profiling of Shh pathway genes showed a significant upregulation of expression associated with stages of progenitor proliferation and neuronal differentiation. Activation of Shh signaling during early stages of retinal regeneration using intraocular injections of the recombinant human SHH (SHH-N) resulted in increased Müller cell gliosis, proliferation, and neuroprotection of damaged retinal neurons. Continued activation of Shh resulted in a greater number of differentiated amacrine and ganglion cells in the fully regenerated retina. Conversely, inhibition of Shh signaling using intraocular injections of cyclopamine resulted in decreased Müller glial cell proliferation and a fewer number of regenerated amacrine and ganglion cells. These data suggest that Shh signaling plays pleiotropic roles in proliferation and differentiation during adult zebrafish retinal regeneration.