Hedgehog proteins play critical roles in organizing the embryonic development of animals, largely through modulation of target gene expression. Little is currently known, however, about the kinds and numbers of genes whose expression is controlled, directly or indirectly, by Hedgehog activity. Using techniques to globally repress or activate Hedgehog signaling in zebrafish embryos followed by microarray-based expression profiling, we have discovered a cohort of genes whose expression responds significantly to loss or gain of Hedgehog function. We have confirmed the Hedgehog responsiveness of a representative set of these genes with whole-mount in situ hybridization as well as real time PCR. In addition, we show that the consensus Gli-binding motif is enriched within the putative regulatory elements of a sizeable proportion of genes that showed positive regulation in our assay, indicating that their expression is directly induced by Hedgehog. Finally, we provide evidence that the Hedgehog-dependent spatially restricted transcription of one such gene, nkx2.9, is indeed mediated by Gli1 through a single Gli recognition site located within an evolutionarily conserved enhancer fragment. Taken together, this study represents the first comprehensive survey of target genes regulated by the Hedgehog pathway during vertebrate development. Our data also demonstrate for the first time the functionality of the Gli-binding motif in the control of Hedgehog signaling-induced gene expression in the zebrafish embryo.