Forkhead box (FOX) proteins have been shown to play important roles in regulating the expression of genes involved in cell growth, proliferation, differentiation, longevity, and transformation. The functional importance of this gene family in normal human skin physiology and disease processes is not well understood. Activation of Sonic Hedgehog (Shh) signaling plays a key role in the development of basal cell carcinomas (BCCs) of the skin in humans. Recent studies have established that some FOX genes are downstream targets of Shh signaling. We have investigated the role of FOX proteins in transducing Shh effects in human skin by using degenerate PCR to identify FOX genes differentially expressed in BCCs. All three known FOXM1 isoforms (a, b, and c) were detected in human skin and cultured keratinocytes, and the transcriptionally active FOXM1b isoform was found to be up-regulated in BCCs. Real-time quantitative RT-PCR showed that the increase in FOXM1 mRNA levels was specific for BCCs and not a reflection of increased cell proliferation in that no up-regulation was seen in squamous cell carcinomas or proliferating primary human keratinocyte cultures. Immunostaining studies showed intense nuclear and cytoplasmic staining throughout BCC tumor islands and not confined to the periphery regions of the tumor where proliferating Ki-67-immunopositive cells are predominantly localized. Expression of the Shh target glioma transcription factor-1 (Gli1) in primary keratinocytes and other cell lines caused a significant elevation of FOXM1 mRNA level and transcriptional activity, indicating that FOXM1 is a downstream target of Gli1. Our data provide the first evidence that activation of Shh signaling via Gli1 is an important determinant of FOXM1 expression in mammalian cells. Given the role of FOXM1 in cell proliferation, the up-regulation of FOXM1 in BCCs may be one of the mechanisms whereby Shh signaling exerts its mitogenic effect on basal keratinocytes, leading to the development of this common human cancer.