Indian Hedgehog (Ihh) is a morphogen expressed by epithelial cells in the small intestine and colon that signals in a paracrine manner to gp38+ stromal cells. The loss of Ihh signaling results in increased epithelial proliferation, lengthening and multiplication of intestinal crypts and the activation of a stromal cell immune response. How Ihh controls epithelial proliferation through the stroma and how it affects colorectal cancer development remains poorly defined. To study the influence of Ihh signaling on the earliest stage of colorectal carcinogenesis, we used a well characterized mouse model in which both alleles of the Adenoma Polyposis Coli (Apc) gene could be inducibly deleted, leading to instant transformation of the colonic epithelium to an adenomatous phenotype. Concurrent deletion of Ihh from the adenomatous colonic epithelium of Apc inducible double mutant mice resulted in a remarkable increase in the hyperproliferative epithelial phenotype and increased accumulation of Lgr5+ stem cells. Transcriptional profiling of sorted colonic gp38+ fibroblasts showed upregulation of three ErbB pathway ligands (EREG, BTC, and NRG1) in Apc-/-Ihh-/- double mutant mice. We found that recombinant EREG, BTC, and NRG1 but not Lgr5 ligand R-Spondin promoted growth and proliferation of Apc double mutant colonic organoids. Thus, the loss of Ihh enhances Apc-driven colonic adenomagenesis via upregulation of ErbB pathway family members in colonic stromal cells. Our findings highlight the critical role of epithelium-derived Indian Hedgehog as a stromal tumor suppressor in the intestine.