Pancreatic ductal adenocarcinoma (PDAC) is characterized by the deregulation of the hedgehog signaling pathway. The Sonic Hedgehog ligand (Shh), absent in the normal pancreas, is highly expressed in pancreatic tumors and is sufficient to induce neoplastic precursor lesions in mouse models. We investigated the mechanism of Shh signaling in PDAC carcinogenesis by genetically ablating the canonical bottleneck of hedgehog signaling, the transmembrane protein Smoothened (Smo), in the pancreatic epithelium of PDAC-susceptible mice. We report that multistage development of PDAC tumors is not affected by the deletion of Smo in the pancreas, demonstrating that autocrine Shh-Ptch-Smo signaling is not required in pancreatic ductal cells for PDAC progression. However, the expression of Gli target genes is maintained in Smo-negative ducts, implicating alternative means of regulating Gli transcription in the neoplastic ductal epithelium. In PDAC tumor cells, we find that Gli transcription is decoupled from upstream Shh-Ptch-Smo signaling and is regulated by TGF-beta and KRAS, and we show that Gli1 is required both for survival and for the KRAS-mediated transformed phenotype of cultured PDAC cancer cells.