Recently, DNA methylation has been suggested as a potential mechanism involved in the transcriptional regulation of SHH gene expression in cancer. However, detailed analyses on the underlying transcriptional mechanisms of SHH expression have not been presented so far and were therefore the focus of this study. We found that the genomic region of SHH contains two different transcriptional start sites and four CpG islands spread from the 5' promoter region to the 3' end of the SHH gene. Based on this CpG island topology we analyzed the influence of DNA methylation within the promoter region as well as in exon 2 and exon 3 on SHH mRNA expression in a large set (n = 14) of benign and malignant human cell lines, and further elucidated the functionality of the two identified SHH transcription initiation sites. Methylation-specific PCR (MSP) clearly showed that SHH is expressed independently of DNA methylation within exon 2 and exon 3 of its genomic region, while methylation of the promoter region is able to abrogate SHH expression. Most interesting, we found activation of the upstream SHH promoter in several breast cancer cell lines when the downstream SHH promoter is methylated. These observations lead us to propose a transcriptional model for the SHH gene, in which combined mechanisms of DNA methylation and alternative promoter usage coordinate the transcriptional activity of this important developmental gene.