Commitment of hematopoietic progenitors to the T cell lineage requires the integration of multiple signaling pathways. Evidence has suggested involvement of hedgehog (Hh) signaling in T cell differentiation through its signal transducer smoothened (Smo). However, the precise function of the Hh pathway remains controversial, mainly because T cell-specific in vivo genetic models have not been used. Using pre-T cell-specific, mature T cell-specific and poly( I)(.)poly(C)- inducible deletions of Smo and antagonists of Smo signaling, we report here that Hh is an essential positive regulator of T cell progenitor differentiation. Furthermore, we localize Hh function to a stage preceding pre-T cell receptor signaling, connect Smo signaling to the activity of the Gli1 and Gli2 transcription factors and demonstrate that Hh affects regulators of thymocyte survival and proliferation.