The expression of genes involved in the Sonic Hedgehog signalling pathway, including Shh, Ptc, Smo, Gli1, Gli2 and Gli3, were found to be expressed in temporal and spatial patterns during early murine tooth development, suggestive of a role in early tooth germ initiation and subsequent epithelial-mesenchymal interactions. Of these Ptc, Smo, Gli1, Gli2 and Gli3 were expressed in epithelium and mesenchyme whereas Shh was only detected in epithelium. This suggests that Shh is involved in both lateral (epithelial-mesenchymal) and planar (epithelial-epithelial) signalling in early tooth development. Ectopic application of Shh protein to mandibular mesenchyme induced the expression of Ptc and Gli1. Addition of exogenous Shh protein directly into early tooth germs and adjacent to tooth germs, resulted in abnormal epithelial invagination, indicative of a role for Shh in epithelial cell proliferation. In order to assess the possible role of this pathway, tooth development in Gli2 and Gli3 mutant embryos was investigated. Gli2 mutants were found to have abnormal development of maxillary incisors, probably resulting from a mild holoprosencephaly, whereas Gli3 mutants had no major tooth abnormalities. Gli2/Gli3 double homozygous mutants did not develop any normal teeth and did not survive beyond embryonic day 14.5; however, Gli2(−/−); Gli3(+/−) did survive until birth and had small molars and mandibular incisors whereas maxillary incisor development was arrested as a rudimentary epithelial thickening. These results show an essential role for Shh signalling in tooth development that involves functional redundancy of downstream Gli genes.