Rhabdomyosarcoma (RMS) is the most common soft tissue sarcoma in children and comprises two major histological subtypes: alveolar rhabdomyosarcoma (ARMS) and embryonal rhabdomyosarcoma (ERMS). Seventy-five percent of ARMS harbor reciprocal chromosomal translocations leading to fusion genes of the forkhead transcription factor FOXO1 and PAX3 or PAX7. The hedgehog (Hh) pathway has been implied in tumor formation and progression of various cancers including RMS. However, whether Hh pathway activation presents a general feature of RMS or whether it is restricted to specific subgroups has not yet been addressed. Here, we report that marker genes of active Hh signaling, that is, Patched1 (Ptch1), Gli1, Gli3 and Myf5, are expressed at significantly higher levels in ERMS and fusion gene-negative ARMS compared with fusion gene-positive ARMS in two distinct cohorts of RMS patients. Consistently, Gli1 expression correlates with Ptch1 expression in ERMS and fusion gene-negative ARMS, but not in fusion gene-positive ARMS. In addition, expression levels of MyoD1 are significantly lower in ERMS and fusion gene-negative ARMS, pointing to an inverse association of Hh activation and early muscle differentiation. Moreover, Myf5 is identified as a novel excellent class predictor for RMS by receiver operating characteristic analysis. Importantly, high expression of Ptch1 or low MyoD1 expression significantly correlate with reduced cumulative survival in fusion gene-negative RMS underscoring the clinical relevance of these findings. By showing that Hh signaling is preferentially activated in specific subgroups of RMS, our study has important implications for molecular targeted therapies, such as small molecule Hh inhibitors, in RMS.