BACKGROUND & AIMS: Indian Hedgehog (Ihh) is expressed by the differentiated epithelial cells of the small intestine and signals to the mesenchyme where it induces unidentified factors that negatively regulate intestinal epithelial precursor cell fate. Recently, genetic variants in the Hh pathway have been linked to the development of inflammatory bowel disease. METHODS: We deleted Ihh from the small intestinal epithelium in adult mice using Cyp1a1-CreIhh(fl/fl) conditional Ihh mutant mice. Intestines were examined by immunohistochemistry, in situ hybridization, and real-time polymerase chain reaction. RESULTS: Deletion of Ihh from the intestinal epithelium initially resulted in a proliferative response of the intestinal epithelium with lengthening and fissioning of crypts and increased Wnt signaling. The epithelial proliferative response was associated with loss of bone morphogenetic protein and Activin signaling from the epithelium of the villus and crypts, respectively. At the same stage we observed a substantial influx of fibroblasts and macrophages into the villus core with increased mesenchymal transforming growth factor-beta signaling and deposition of extracellular matrix proteins. Prolonged loss of Ihh resulted in progressive leukocyte infiltration of the crypt area, blunting and loss of villi, and the development of intestinal fibrosis. CONCLUSIONS: Loss of Ihh initiates several events that are characteristic of an intestinal wound repair response. Prolonged loss resulted in progressive inflammation, mucosal damage, and the development of intestinal fibrosis. Ihh is a signal derived from the superficial epithelial cells that may act as a critical indicator of epithelial integrity.