Mutations in the transmembrane receptor patched1 (ptc1) are responsible for the majority of basal cell carcinoma (BCC) cases. Many of these mutations, including ptc1-Q688X, result in premature truncation of the ptc1 protein. ptc1-Q688X has been identified in patients with both BCC and nevoid basal cell carcinoma syndrome, an inheritable disorder causing a predisposition to cancer susceptibility. Here we describe a mechanism by which ptc1-Q688X causes constitutive cellular signaling. Cells expressing ptc1-Q688X demonstrate an increase in cell cycle progression and induce cell transformation. The ptc1-Q688X mutant enhances Gli1 activity, a downstream reporter of sonic hedgehog (shh)-ptc1 signaling, independent of shh stimulation. In contrast to wild-type ptc1, ptc1-Q688X fails to associate with endogenous cyclin B1. Expression of nuclear-targeted cyclin B1 derivatives promotes Gli1-dependent transcription, which correlates temporally with cyclin B1-cdk1 kinase activity. Coexpression of wild-type ptc1 with a nuclear-targeted cyclin B1 derivative, mutated to mimic constitutive phosphorylation, dramatically decreases Gli1 activity. In addition, the coexpression of this constitutively nuclear cyclin B1 derivative with ptc1-Q688X substantially enhances foci formation. These studies therefore describe a molecular mechanism for the aberrant activity of ptc1-Q688X that includes the premature activation of the transcription factor Gli1.