Hedgehog (HH)/GLI signaling plays a critical role in epidermal development and basal cell carcinoma. Here, we provide evidence that epidermal growth factor receptor (EGFR) signaling modulates the target gene expression profile of GLI transcription factors in epidermal cells. Using expression profiling and quantitative reverse transcriptase PCR, we identified a set of 19 genes whose transcription is synergistically induced by GLI1 and parallel EGF treatment. Promoter studies of a subset of GLI/EGF-regulated genes, including the genes encoding interleukin-1 antagonist IL1R2, Jagged 2, cyclin D1, S100A7, and S100A9, suggest convergence of EGFR and HH/GLI signaling at the level of promoters of selected direct GLI target genes. Inhibition of EGFR and MEK/ERK but not of phosphatidylinositol 3-kinase/AKT abrogated synergistic activation of GLI/EGF target genes, showing that EGFR can signal via RAF/MEK/ERK to cooperate with GLI proteins in selective target gene regulation. Coexpression of the GLI/EGF target IL1R2, EGFR, and activated ERK1/2 in human anagen hair follicles argues for a cooperative role of EGFR and HH/GLI signaling in specifying the fate of outer root sheath (ORS) cells. We also show that EGF treatment neutralizes GLI-mediated induction of epidermal stem cell marker expression and provide evidence that EGFR signaling is essential for GLI-induced cell cycle progression in epidermal cells. The results suggest that EGFR signaling modulates GLI target gene profiles which may play an important regulatory role in ORS specification, hair growth, and possibly cancer.