Appearance of mouse fetal Leydig cells requires activation of the Hedgehog pathway. Upon binding to the membrane-bound receptor patched, Hedgehog ligands induce intracellular responses via a combined effect of Gli transcription factors. Szczepny et al. (Biol Reprod 2009; 80:258-263) found that Gli1, one of the three Gli transcription factors, is present in the fetal testis and that its expression is suppressed by the Hedgehog inhibitor cyclopamine. In this study, we investigated the involvement of the Gli1 and Gli2 factors in mouse fetal Leydig cell differentiation. The Gli1 and Gli2 transcription factors showed an overlapping expression pattern in the testis interstitium at the time when fetal Leydig cells appear. Despite their similar expression, Gli1 and Gli2 patterns were differentially regulated. Initial Gli1 and Gli2 expression depends upon an active Hedgehog pathway; however, maintenance of only Gli1, but not Gli2, expression requires activation of the pathway. Inactivation of either the Gli1 or Gli2 gene did not affect fetal Leydig cell development and testis morphology, suggesting a functional redundancy. When the transcriptional activity of both GLI1 and GLI2 was suppressed by a selective inhibitor, GANT61, in cultured fetal testes before the appearance of fetal Leydig cells, Gli1 and Gli2 expression and steroidogenic marker activity were completely abolished. However at later stages when Leydig cells were already present, GANT61 treatment inhibited Gli1 expression but had no effects on Gli2 expression and fetal Leydig cell appearance. Our results reveal overlapping and redundant Gli1 and Gli2 roles in fetal Leydig cell differentiation and a novel regulation of Gli2 expression in the fetal testis.