The identification of mutations in the human homolog of the Drosophila segment polarity gene Patched in basal cell carcinoma has sparked intense interest in the role of this gene in human disorders. The transmembrane protein Patched is a receptor for the morphogene Sonic Hedgehog. Sonic Hedgehog/Patched signaling involves another transmembrane protein, Smoothened, and its intracellular effectors, including the proto-oncogene GLI1. During the past 2 years it has become evident that mutations in Patched or in one of the components of its signaling pathway contribute to the formation of several common human tumors. It is now well established that Patched is a tumor suppressor gene. The Sonic Hedgehog/Patched/Smoothened signaling pathway is thus rapidly emerging as one of the most important regulators of oncogenic transformation. This pathway also plays an important role during mammalian embryonic development. This dual role is especially visible in humans with inherited Patched mutations. Such patients suffer from Gorlin, or nevoid basal cell carcinoma, syndrome and exhibit a variety of developmental defects accompanied by a predisposition to tumor formation. Activating mutations in Sonic Hedgehog and Smoothened lead to similar phenotypes as do loss-of function mutations in Patched. By means of transgenic and gene targeting technologies the respective mutations have been expressed in the mouse. Such mutant mouse strains exhibit many symptoms observed in humans. These strains are useful models to study the pathogenesis of several common human tumors and developmental defects. Furthermore they provide important tools to study the Sonic Hedgehog/Patched/Smoothened signaling at the molecular and biochemical level.