Building and maintaining skeletal tissue requires the activity of skeletal stem and progenitor cells (SSPCs). Following injury, local pools of these SSPCs become active and coordinate to build new cartilage and bone tissues. While recent studies have identified specific markers for these SSPCs, how they become activated in different injury contexts is not well-understood. Here, using a model of large-scale rib bone regeneration in mice, we demonstrate that the growth factor, Sonic Hedgehog (SHH), is an early and essential driver of large-scale bone healing. Shh expression is broadly upregulated in the first few days following rib bone resection, and conditional knockout of Shh at early but not late post-injury stages severely inhibits cartilage callus formation and later bone regeneration. Whereas Smoothened (Smo), a key transmembrane component of the Hh pathway, is required in Sox9+ lineage cells for rib regeneration, we find that Shh is required in a Prrx1-expressing, Sox9-negative mesenchymal population. Intriguingly, upregulation of Shh expression and requirements for Shh and Smo may be unique to large-scale injuries, as they are dispensable for both complete rib and femur fracture repair. In addition, single-cell RNA sequencing of callus tissue from animals with deficient Hedgehog signaling reveals a depletion of Cxcl12-expressing cells, which may indicate failed recruitment of Cxcl12-expressing SSPCs during the regenerative response. These results reveal a mechanism by which Shh expression in the local injury environment unleashes large-scale regenerative abilities in the murine rib.