Hedgehog (Hh) signaling is essential for development, homeostasis, and regeneration1. Misactivation of the Hh pathway underlies medulloblastoma, the most common malignant brain tumor in children, and basal cell carcinoma (BCC), the most common cancer in the United States2. Primary cilia regulate Hh signal transduction3, but target genes that drive cell fate decisions in response to ciliary ligands or oncogenic Hh signaling are incompletely understood. Here we define the Hh gene expression program using RNA sequencing of cultured cells treated with ciliary ligands, BCCs from humans, and Hh-associated medulloblastomas from humans and mice (Fig. 1a). To validate our results, we integrate lipidomic mass spectrometry and bacterial metabolite labeling of free sterols with genetic and pharmacologic approaches in cells and mice. Our results reveal novel Hh target genes such as the oxysterol synthase Hsd11β1 and the adipokine Retnla that regulate lipid metabolism to drive cell fate decisions in response to Hh pathway activation. These data provide insights into cellular mechanisms underlying ciliary and oncogenic Hh signaling and elucidate targets to treat Hh-associated cancers.