Hedgehog (Hh) signal transduction is directly required in zebrafish DRG precursors for proper development of DRG neurons. Zebrafish mutations in the Hh signaling pathway result in the absence of DRG neurons and the loss of expression of neurogenin1 (ngn1), a gene required for determination of DRG precursors. Cell transplantation experiments demonstrate that Hh acts directly on DRG neuron precursors. Blocking Hh pathway activation at later stages of embryogenesis with the steroidal alkaloid, cyclopamine, further reveals that the requirement for a Hh signal response in DRG precursors correlates with the onset of ngn1 expression. These results suggest that Hh signaling may normally promote DRG development by regulating expression of ngn1 in DRG precursors.