AbstractHedgehog signaling regulates differentiation, survival, and proliferation of the earliest double-negative (DN) thymocytes, but its importance at later stages of T-cell development is controversial. Here we use loss- and gain-of-function mouse models to show that Shh, by signaling directly to the developing thymocyte, is a negative regulator of pre-TCR–induced differentiation from DN to double-positive (DP) cell. When hedgehog signaling was reduced, in the Shh−/− and Gli2−/− thymus, or by T lineage–specific transgenic expression of a transcriptional-repressor form of Gli2 (Gli2ΔC2), differentiation to DP cell after pre-TCR signal transduction was increased. In contrast, when Hh signaling was constitutively activated in thymocytes, by transgenic expression of a constitutive transcriptional-activator form of Gli2 (Gli2ΔN2), the production of DP cells was decreased. Gene expression profiling showed that physiologic Hh signaling in thymocytes maintains expression of the transcription factor FoxA2 on pre-TCR signal transduction.