Activation of the Sonic hedgehog signaling pathway, primarily through mutational inactivation of the PTCH1 gene, is associated with the development of basal cell carcinoma (BCC). Gli1, a member of the Gli family of transcription factors, is expressed in BCC and in transgenic mice targeted expression of Gli1 in basal keratinocytes leads to BCC development. In addition to BCC, previous studies have shown that Gli1 is expressed in the outer root sheath (ORS) of the hair follicle but is absent in interfollicular epidermis. In this study, we have characterized the expression pattern of two protein kinase C (PKC) isoforms expressed in BCC and hair follicles. We have then used reporter assays to investigate the effects of these isoforms on Gli1 transcriptional activity. We report that in BCC sections, PKCα but not PKCδ was weakly expressed in the epidermis, whereas in the hair follicle, PKCα was expressed in the ORS and PKCδ in the inner root sheath. In contrast, neither PKCα nor PKCδ was expressed in BCC tumor islands, although both isoforms were often expressed in the surrounding stroma. In mammalian 293T cells, coexpression of constitutively active PKCα reduced the activity of Gli1 in a dose-dependent manner, whereas constitutively active PKCδ increased the activity of Gli1, although this required higher expression levels. Regulation of mutant Gli1 protein localized exclusively to the nucleus was similar to that of the wild-type protein, indicating that nuclear-cytoplasmic shuttling is not a determinant of Gli1 control by either PKC isoform. Furthermore, PKC regulation of Gli1 did not involve activation of mitogen-activated protein kinase signaling. Finally, we show that exogenous Gli1 does not alter the expression of PKCα in human primary keratinocytes, suggesting that loss of this isoform in BCC is not via Hedgehog signaling. As BCCs have been proposed to originate from the ORS, loss of PKCα expression may be relevant to tumor formation; this may, in part, be because of the predicted increase in Gli1 transcriptional activity.