Pulmonary ionocytes express high levels of cystic fibrosis transmembrane conductance regulator (CFTR), an anion channel that is critical for hydration of the airways and mucociliary clearance. However, the cellular mechanisms that govern ionocyte specification and function remain unclear. We observed that increased abundance of ionocytes in cystic fibrosis (CF) airway epithelium was associated with enhanced expression of Sonic Hedgehog (SHH) effectors. In this study, we evaluated whether the SHH pathway directly impacts ionocyte differentiation and CFTR function in airway epithelia. Pharmacological HPI1-mediated inhibition of SHH signaling component GLI1 significantly impaired human basal cell specification of ionocytes and ciliated cells but significantly enhanced specification of secretory cells. By contrast, activation of the SHH pathway effector smoothened (SMO) with the chemical agonist SAG significantly enhanced ionocyte specification. The abundance of CFTR+ BSND+ ionocytes under these conditions had a direct relationship with CFTR-mediated currents in differentiated air-liquid interface (ALI) airway cultures. These findings were corroborated in ferret ALI airway cultures generated from basal cells in which the genes encoding the SHH receptor PTCH1 or its intracellular effector SMO were genetically ablated using CRISPR-Cas9, causing aberrant activation or suppression of SHH signaling, respectively. These findings demonstrate that SHH signaling is directly involved in airway basal cell specification of CFTR-expressing pulmonary ionocytes and is likely responsible for enhanced ionocyte abundance in the CF proximal airways. Pharmacologic approaches to enhance ionocyte and reduce secretory cell specification after CFTR gene editing of basal cells may have utility in the treatment of CF.