Chronic graft-versus-host disease (cGVHD) is a prognosis limiting complication of allogeneic stem cell transplantation. The molecular mechanisms underlying cGVHD are incompletely understood, and targeted therapies are not yet established for clinical use. Here we examined the role of the hedgehog pathway in sclerodermatous cGVHD. Hedgehog signaling was activated in human and murine cGVHD with increased expression of sonic hedgehog and accumulation of the transcription factors Gli-1 and Gli-2. Treatment with LDE223, a highly selective small-molecule antagonist of the hedgehog coreceptor Smoothened (Smo), abrogated the activation of hedgehog signaling and protected against experimental cGVHD. Preventive therapy with LDE223 almost completely impeded the development of clinical and histologic features of sclerodermatous cGVHD. Treatment with LDE223 was also effective, when initiated after the onset of clinical manifestations of cGVHD. Hedgehog signaling stimulated the release of collagen from cultured fibroblasts but did not affect leukocyte influx in murine cGVHD, suggesting direct, leukocyte-independent stimulatory effects on fibroblasts as the pathomechanism of hedgehog signaling in cGVHD. Considering the high morbidity of cGVHD, the current lack of efficient molecular therapies for clinical use, and the availability of well-tolerated inhibitors of Smo, targeting hedgehog signaling might be a novel strategy for clinical trials in cGVHD.