Tubular epithelium constitutes the majority of the renal parenchyma and is the primary target of various kidney injuries. However, how the injured tubules drive interstitial fibroblast activation and proliferation remains poorly understood. Here, we investigated the role of sonic hedgehog (Shh), a secreted extracellular signaling protein, in fibroblast proliferation. Shh was induced in renal tubular epithelia in animal models of CKD induced by ischemia/reperfusion injury (IRI), adriamycin, or renal mass ablation, and in renal tubules of kidney biopsy specimens from CKD patients with different etiologies. Using Gli1-CreER(T2) reporter mice, we identified interstitial fibroblasts as the principal targets of renal Shh signaling in vivo. In vitro, incubation with Shh promoted normal rat kidney fibroblast proliferation, which was assessed by cell counting, MTT assay, and BrdU incorporation assay, and stimulated the induction of numerous proliferation-related genes. However, Shh had no effect on the proliferation of renal tubular epithelial cells. In vivo, overexpression of Shh promoted fibroblast expansion and aggravated kidney fibrotic lesions after IRI. Correspondingly, blockade of Shh signaling by cyclopamine, a small molecule inhibitor of Smoothened, inhibited fibroblast proliferation, reduced myofibroblast accumulation, and attenuated renal fibrosis. These studies identify Shh as a novel, specific, and potent tubule-derived growth factor that promotes interstitial fibroblast proliferation and activation. Our data also suggest that blockade of Shh signaling is a plausible strategy for therapeutic intervention of renal fibrosis.