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Activation of the hedgehog pathway is causative of virtually all sporadic and Gorlin syndrome-related basal cell carcinomas (BCCs), with loss of function of Ptc1 being the most common genomic lesion. Sporadic BCCs also overexpress Dsg2, a desmosomal cadherin normally found in the basal layer. Using a mouse model of Gorlin syndrome (Ptc1+/lacZ mice), we found that overexpressing Dsg2 in the basal layer (K14-Dsg2/Ptc1+/lacZ mice) or the superficial epidermis (Inv-Dsg2/Ptc1+/lacZ mice) resulted in increased spontaneous BCC formation at 3 and 6 months, respectively. The tumors did not show loss of heterozygosity of Ptc1, despite high levels of Gli1 and phosphorylated Stat3. A panel of sporadic human BCCs showed increased staining of both Dsg2 and phosphorylated Stat3 in all nine samples. Overexpression of Dsg2 in ASZ001 cells, a Ptc1–/– BCC cell line, induced Stat3 phosphorylation and further increased Gli1 levels, in both an autocrine and paracrine manner. Three different Stat3 inhibitors reduced viability and Gli1 expression in ASZ001 cells but not in HaCaT cells. Conversely, stimulation of Stat3 in ASZ001 cells with IL-6 increased Gli1 expression. Our results indicate that Dsg2 enhances canonical hedgehog signaling downstream of Ptc1 to promote BCC development through the activation of phosphorylated Stat3 and regulation of Gli1 expression.