Hedgehog (Hh) signaling plays an important role in embryonic development and in the regulation of a variety of cellular functions. Aberrant activation of Hh signaling has been implicated in several human cancers including hepatocellular carcinoma (HCC). In this study we examined the pathobiological functions and molecular mechanisms of the Hh signaling pathway in HCC cells. Treatment of cultured human HCC cells (Huh7, Hep3B, and HepG2) with the Hh signaling ligand (recombinant Shh) or agonist, SAG and purmorphamine, prevented the induction of autophagy. In contrast, GANT61 (a small molecule inhibitor of Gli1 and Gli2) induced autophagy, as determined by immunoblotting for microtubule-associated protein light chain 3 (LC3) and p62, GFP-LC3 puncta, monodansylcadaverine (MDC) staining, and transmission electron microscopy. Hh inhibition-induced autophagy was associated with up-regulation of Bnip3, as determined by immunoblotting and real-time polymerase chain reaction (PCR) assay. Knockdown of Bnip3 by RNAi impaired GANT61-induced autophagy. Additionally, Hh inhibition-induced autophagy was associated with Bnip3-mediated displacement of Bcl-2 from Beclin-1, as determined by immunoblotting and immunoprecipitation assays. Furthermore, inhibition of Hh signaling increased HCC cell apoptosis and decreased cell viability, as determined by caspase and WST-1 assays. Pharmacological or genetic inhibition of autophagy by 3-methyladenine (3-MA) or Beclin-1 small interfering RNA (siRNA) partially suppressed GANT61-induced cell apoptosis and cytotoxicity. In a tumor xenograft model using SCID mice inoculated with Huh7 cells, administration of GANT61 inhibited tumor formation and decreased tumor volume; this effect was partially blocked by the autophagy inhibitor, 3-MA. Conclusion: These findings provide novel evidence that Hh inhibition induces autophagy through up-regulation of Bnip3 and that this mechanism contributes to apoptosis. Therefore, the status of autophagy is a key factor that determines the therapeutic response to Hh-targeted therapies. (Hepatology 2013;53:995–1010)