Ewing family tumors (EFT), classically Ewing's sarcoma and peripheral primitive neuroectodermal tumor, share a common class of tumor-specific fusion genes thought to be key mediators of tumor biology. Here we demonstrate that the most common Ewing's fusion, EWS/FLI1, produces transcriptional upregulation of GLI1 and its direct transcriptional target PATCHED1 in a model transformation system. This deregulation of GLI1 is common to other EWS/ets chimera and depends on the functional transcriptional regulatory domains. Inhibition of GLI1 via RNAi or via overexpression of endogenous inhibitors results in a reduction of EWS/FLI1 transformation activity. Activation of GLI1 appears to occur in a Hedgehog-independent fashion as blockade of Hedgehog signaling has only a modest effect on EFT cells. We present evidence that EWS/FLI1 upregulation of cMYC may play a role in the upregulation of GLI1 in EWS/FLI1-transformed NIH3T3 cells. Finally, we demonstrate that observations made in a model transformation system translate to an Ewing cellular background. EFT cell lines express GLI1 and PATCHED and this expression is EWS/FLI1 dependent. Inhibition of GLI1 expression via RNAi results in reduced anchorage-independent growth in an EFT cell line. GLI1 appears to be a transcriptionally deregulated target of EWS/FLI1 that mediates a portion of its tumorigenic phenotype.