Previously, a small molecule, purmorphamine, was identified that selectively induces osteogenesis in multipotent mesenchymal progenitor cells. In order to gain insights into the mechanism of action of purmorphamine, high-density oligonucleotide microarrays were used to profile gene expression in multipotent mesenchymal progenitor cells treated with either purmorphamine or bone morphogenetic protein-4 (BMP-4). In contrast to BMP-4 treatment, purmorphamine activates the Hedgehog (Hh) signaling pathway, resulting in the up- and downregulation of its downstream target genes, including Gli1 and Patched. Moreover, the known Hh signaling antagonists, cyclopamine and forskolin, completely block the osteogenesis and Glimediated transcription induced by purmorphamine. These results demonstrate that purmorphamine is a small molecule agonist of Hedgehog signaling, and it may ultimately be useful in the treatment of bone-related disease and neurodegenerative disease.