Basal cell carcinoma, medulloblastoma, rhabdomyosarcoma and other human tumours are associated with mutations that activate the proto-oncogene Smoothened (SMO) or that inactivate the tumour suppressor Patched (PTCH). Smoothened and Patched mediate the cellular response to the Hedgehog (Hh) secreted protein signal, and oncogenic mutations affecting these proteins cause excess activity of the Hh response pathway. Here we show that the plant-derived teratogen cyclopamine, which inhibits the Hh response, is a potential 'mechanism-based' therapeutic agent for treatment of these tumours. We show that cyclopamine or synthetic derivatives with improved potency block activation of the Hh response pathway and abnormal cell growth associated with both types of oncogenic mutation. Our results also indicate that cyclopamine may act by influencing the balance between active and inactive forms of Smoothened.