The Hedgehog pathway is a critical mediator of embryonic patterning and organ development, including hematopoiesis. It influences stem cell fate, differentiation, proliferation, and apoptosis in responsive tissues. In adult organisms, hedgehog pathway activity is required for aspects of tissue maintenance and regeneration; however, there is increasing awareness that abnormal hedgehog signaling is associated with malignancy. Hedgehog signaling is critical for early hematopoietic development, but there is controversy over its role in normal hematopoiesis in adult organisms where it may be dispensable. Conversely, hedgehog signaling appears to be an important survival and proliferation signal for a spectrum of hematologic malignancies. Furthermore, hedgehog signaling may be critical for the maintenance and expansion of leukemic stem cells and therefore provides a possible mechanism to selectively target these primitive cell subpopulations, which are resistant to conventional chemotherapy. Indeed, phase 1 clinical trials of hedgehog pathway inhibitors are currently underway to test this hypothesis in myeloid leukemias. This review covers: (1) the hedgehog pathway and its role in normal and malignant hematopoiesis, (2) the recent development of clinical grade small molecule inhibitors of the pathway, and (3) the potential utility of hedgehog pathway inhibition as a therapeutic strategy in hemato-oncology.