The hedgehog (HH) signaling pathway regulates normal cell growth and differentiation. As a consequence of improper control, aberrant HH signaling results in tumorigenesis and supports aggressive phenotypes of human cancers, such as neoplastic transformation, tumor progression, metastasis, and drug resistance. Canonical activation of HH signaling occurs through binding of HH ligands to the transmembrane receptor Patched 1 (PTCH1), which derepresses the transmembrane G protein-coupled receptor Smoothened (SMO). Consequently, the glioma-associated oncogene homolog 1 (GLI1) zinc-finger transcription factors, the terminal effectors of the HH pathway, are released from suppressor of fused (SUFU)-mediated cytoplasmic sequestration, permitting nuclear translocation and activation of target genes. Aberrant activation of this pathway has been implicated in several cancer types, including medulloblastoma, rhabdomyosarcoma, basal cell carcinoma, glioblastoma, and cancers of lung, colon, stomach, pancreas, ovarian, and breast. Therefore, several components of the HH pathway are under investigation for targeted cancer therapy, particularly GLI1 and SMO. GLI1 transcripts are reported to undergo alternative splicing to produce truncated variants: loss-of-function GLI1ΔN and gain-of-function truncated GLI1 (tGLI1). This review covers the biochemical steps necessary for propagation of the HH activating signal and the involvement of aberrant HH signaling in human cancers, with a highlight on the tumor-specific gain-of-function tGLI1 isoform.