Sustained hedgehog (Hh) signaling mediated by the GLI transcription factors is implicated in many types of cancer. Identification of Hh/GLI target genes modulating the activity of other pathways involved in tumor development promise to open new ways for better understanding of tumor development and maintenance. Here we show that SOCS1 is a direct target of Hh/GLI signaling in human keratinocytes and medulloblastoma cells. SOCS1 is a potent inhibitor of interferon gamma (IFN-y)/STAT1 signaling. IFN-у/STAT1 signaling can induce cell cycle arrest, apoptosis and anti-tumor immunity. The transcription factors GLI1 and GLI2 activate the SOCS1 promoter, which contains five putative GLI binding sites, and GLI2 binding to the promoter was shown by chromatin immunoprecipitation. Consistent with a role of GLI in SOCS1 regulation, STAT1 phosphorylation is reduced in cells with active Hh/GLI signaling and IFN-у/STAT1 target gene activation is decreased. Furthermore, IFN-у signaling is restored by shRNA mediated knock down of SOCS1. Here, we identify SOCS1 as a novel Hh/GLI target gene, indicating a negative role of Hh/GLI pathway in IFN-y/STAT1 signaling.