The sonic hedgehog (Shh) pathway has essential roles in several processes during development of the vertebrate central nervous system (CNS). Here, we report that Shh regulates dendritic spine formation in hippocampal pyramidal neurons via a novel pathway that directly regulates the actin cytoskeleton. Shh signaling molecules Patched (Ptc) and Smoothened (Smo) are expressed in several types of postmitotic neurons, including cerebellar Purkinje cells and hippocampal pyramidal neurons. Knockdown of Smo induces dendritic spine formation in cultured hippocampal neurons independently of Gli-mediated transcriptional activity. Smo interacts with Tiam1, a guanine nucleotide exchange factor for Rac1, via its cytoplasmic C-terminal region. Inhibition of Tiam1 or Rac1 activity suppresses spine induction by Smo knockdown. Shh induces remodeling of the actin cytoskeleton independently of transcriptional activation in mouse embryonic fibroblasts. These findings demonstrate a novel Shh pathway that regulates the actin cytoskeleton via Tiam1-Rac1 activation.