Successful treatment of diffuse large B-cell lymphoma (DLBCL) is frequently hindered by the development of resistance to conventional chemotherapy resulting in disease relapse and high mortality. High expression of antiapoptotic and/or drug transporter proteins induced by oncogenic signaling pathways has been implicated in the development of chemoresistance in cancer. Previously, our studies showed that high expression of adenosine triphosphate-binding cassette drug transporter ABCG2 in DLBCL correlated inversely with disease- and failure-free survival. In this study, we have implicated activated hedgehog (Hh) signaling pathway as a key factor behind high ABCG2 expression in DLBCL through direct upregulation of ABCG2 gene transcription. We have identified a single binding site for GLI transcription factors in the ABCG2 promoter and established its functionality using luciferase reporter, site-directed mutagenesis and chromatin-immunoprecipitation assays. Furthermore, in DLBCL tumor samples, significantly high ABCG2 and GLI1 levels were found in DLBCL tumors with lymph node involvement in comparison with DLBCL tumor cells collected from pleural and/or peritoneal effusions. This suggests a role for the stromal microenvironment in maintaining high levels of ABCG2 and GLI1. Accordingly, in vitro co-culture of DLBCL cells with HS-5 stromal cells increased ABCG2 mRNA and protein levels by paracrine activation of Hh signaling. In addition to ABCG2, co-culture of DLBCL cells with HS-5 cells also resulted in increase expression of the antiapoptotic proteins BCL2, BCL-xL and BCL2A1 and in induced chemotolerance to doxorubicin and methotrexate, drugs routinely used for the treatment of DLBCL. Similarly, activation of Hh signaling in DLBCL cell lines with recombinant Shh N-terminal peptide resulted in increased expression of BCL2 and ABCG2 associated with increased chemotolerance. Finally, functional inhibition of ABCG2 drug efflux activity with fumitremorgin C or inhibition of Hh signaling with cyclopamine-KAAD abrogated the stroma-induced chemotolerance suggesting that targeting ABCG2 and Hh signaling may have therapeutic value in overcoming chemoresistance in DLBCL.