During bladder development, primitive mesenchyme differentiates into smooth muscle (SM) under the influence of urothelium. The gene(s) responsible for this process have not been elucidated. We propose that the Sonic hedgehog (Shh) signaling pathway is critical in bladder SM formation. Herein, we examine the role of the Shh-signaling pathway during SM differentiation in the embryonic mouse bladder. Genes in the Shh pathway and SM expression in mouse embryonic (E) bladders (E12.5, 13.5, and 14.5) were examined by immunohistochemistry (IHC), in situ hybridization, and reverse transcription polymerase chain reaction (RT-PCR). To examine the effects of disrupting Shh signaling, bladder tissues were isolated at E12.5 and E14.5, that is, before and after bladder SM induction. The embryonic bladders were cultured on membranes floating on medium with and without 10 muM of cyclopamine, an Shh inhibitor. After 3 days, SM expression was examined by assessing the following: SM alpha-actin (SMAA), SM gamma-actin (SMGA), SM-myosin heavy chain (SM-MHC), Patched, GLI1, bone morphogenic protein 4 (BMP4), and proliferating cell nuclear antigen (PCNA) by IHC and RT-PCR. SM-related genes and proteins were not expressed in E12.5 mouse embryonic bladder before SM differentiation, but were expressed by E13.5 when SM differentiation was initiated. Shh was expressed in the urothelium in E12.5 bladders. Shh-related gene expression at E12.5 was significantly higher than at E14.5. In cyclopamine-exposed cultures of E12.5 tissue, SMAA, SMGA, GLI1, and BMP4 gene expression was significantly decreased compared with controls, but PCNA gene expression did not change. In cyclopamine-exposed E14.5 cultures, SMGA and SM-MHC gene expression did not change compared with controls. Using an in vitro embryonic bladder culture model, we were able to define the kinetics of SM- and Shh-related gene expression. Cyclopamine inhibited detrusor SM actin induction, but did not inhibit SM-MHC induction. SMAA and SMGA genes appear to be induced by Shh-signaling pathways, but the SM-MHC gene is not. Based on Shh expression by urothelium and the effects of Shh inhibition on bladder SM induction, we hypothesize that urothelial-derived Shh orchestrates induction of SM in the fetal mouse bladder.