The hedgehog-patched (hh-ptc) intercellular signaling pathway has recently been shown to control the proliferation of epithelial stem cells in both Drosophila and vertebrates. Mutant and ectopic expression analyses in Drosophila suggest that the HH protein diffuses from the signaling cells to promote the proliferation of nearby ovarian somatic stem cells by antagonizing the suppression of its receptor PTC towards the CI transcription factor in the stem cells. Consequently, the transcription of CI-dependent genes leads to stem cell proliferation. This regulatory pathway appears to function also in vertebrates, where defects in ptc cause basal cell carcinoma, tumors of epidermal stem cell origin. Basal cell carcinoma can also be induced by ectopic expression of Sonic hedgehog (shh) or Gli1, the vertebrate homolog of ci. These studies suggest the conservation of the hh signaling pathway in controlling epithelial stem cell divisions among different organisms.