Although lung cancers with activating mutations in the epidermal growth factor receptor (EGFR) are highly sensitive to selective EGFR tyrosine kinase inhibitors (TKIs), these tumors invariably develop acquired drug resistance. Host stromal cells have been found to have a considerable effect on the sensitivity of cancer cells to EGFR TKIs. Little is known, however, about the signaling mechanisms through which stromal cells contribute to the response to EGFR TKI in non-small cell lung cancer. This work examined the role of hedgehog signaling in cancer-associated fibroblast (CAF)-mediated resistance of lung cancer cells to the EGFR TKI erlotinib. PC9 cells, non-small cell lung cancer cells with EGFR-activating mutations, became resistant to the EGFR TKI erlotinib when cocultured in vitro with CAFs. Polymerase chain reaction and immunocytochemical assays showed that CAFs induced epithelial to mesenchymal transition phenotype in PC9 cells, with an associated change in the expression of epithelial to mesenchymal transition marker proteins including vimentin. Importantly, CAFs induce upregulation of the 7-transmembrane protein smoothened, the central signal transducer of hedgehog, suggesting that the hedgehog signaling pathway is active in CAF-mediated drug resistance. Indeed, downregulation of smoothened activity with the smoothened antagonist cyclopamine induces remodeling of the actin cytoskeleton independently of Gli-mediated transcriptional activity in PC9 cells. These findings indicate that crosstalk with CAFs plays a critical role in resistance of lung cancer to EGFR TKIs through induction of the epithelial to mesenchymal transition and may be an ideal therapeutic target in lung cancer.