Growth of basal cell carcinomas (BCCs) requires high levels of hedgehog (HH) signalling through the transcription factor GLI(1). Although inhibitors of membrane protein smoothened (SMO) effectively suppress HH signalling, early tumour resistance illustrates the need for additional downstream targets for therapy(1-6). Here we identify atypical protein kinase C (aPKC-iota/lambda) as a novel GLI regulator in mammals. aPKC-iota/lambda and its polarity signalling partners' co-localize at the centrosome and form a complex with missing-in-metastasis (MIM), a scaffolding protein that potentiates HH signalling(8,9). Genetic or pharmacological loss of aPKC-iota/lambda function blocks HH signalling and proliferation of BCC cells. Prkci is a HH target gene that forms a positive feedback loop with GLI and exists at increased levels in BCCs. Genome-wide transcriptional profiling shows that aPKC-iota/lambda? and SMO control the expression of similar genes in tumour cells. aPKC-iota/lambda functions downstream of SMO to phosphorylate and activate GLI1, resulting in maximal DNA binding and transcriptional activation. Activated aPKC-iota/lambda. is upregulated in SMO-inhibitor-resistant tumours and targeting aPKC-iota/lambda suppresses signalling and growth of resistant BCC cell lines. These results demonstrate that aPKC-iota/lambda is critical for HH-dependent processes and implicates aPKC-iota/lambda as a new, tumour-selective therapeutic target for the treatment of SMO-inhibitor-resistant cancers. [GRAPHICS] .