Sonic hedgehog (SHH) plays an important role in postnatal tissue repair. The present study tested the hypothesis that impaired SHH pathway results in delayed wound healing by suppressing cutaneous nitric oxide (NO) function in type 1 diabetes. Adult male C57/B6 mice and streptozotocin (STZ)-induced type 1 diabetic mice were used. While cutaneous SHH and Ptc1 proteins were significantly increased on day 4 after wounding compared to day 0 in normal mice, both were significantly decreased in STZ-induced diabetic mice. Topical application of SHH restored wound healing delay in STZ-induced diabetic mice, with a concomitant augmentation of both cutaneous constitutive NOS activity and nitrite level. The effects of Shh on wound healing and cutaneous NO function were markedly inhibited by Shh receptor inhibitor cyclopamine. After 24-hour treatment in vitro, SHH (5-20 µg/mL) significantly increased cutaneous eNOS protein expression, NOS activity and NO level in normal mice and STZ-induced diabetic mice in a concentration-dependent manner, an effect that was blunted by cyclopamine and NOS inhibitor L-NAME. These results demonstrate that SHH pathway is activated in normal wound, and its reduction results in impaired NO function and wound healing in diabetes. Strategies aimed at augmenting endogenous SHH pathway may provide an effective means in ameliorating delayed diabetic wound healing.