Activation of sonic hedgehog (Shh) signaling occurs in the majority of pancreatic ductal adenocarcinomas. Here we investigate the mechanisms by which Shh contributes to pancreatic tumorigenesis. We find that Shh expression enhances proliferation of pancreatic duct epithelial cells, potentially through the transcriptional regulation of the cell cycle regulators cyclin D1 and p21. We further show that Shh protects pancreatic duct epithelial cells from apoptosis through the activation of phosphatidylinositol 3-kinase signaling and the stabilization of Bcl-2 and Bcl-X(L). Significantly, Shh also cooperates with activated K-Ras to promote pancreatic tumor development. Finally, Shh signaling enhances K-Ras-induced pancreatic tumorigenesis by reducing the dependence of tumor cells on the sustained activation of the MAPK and phosphatidylinositol 3-kinase/Akt/mTOR signaling pathways. Thus, our data suggest that Shh signaling contributes to tumor initiation in the pancreas through at least two mechanisms and additionally enhances tumor cell resistance to therapeutic intervention. Collectively, our findings demonstrate crucial roles for Shh signaling in multiple stages of pancreatic carcinogenesis.