Sonic Hedgehog (Shh) signaling has been extensively studied for its role in developmental biology and cancer biology. The association between Shh and cancer development in general is well established but the functional role of Shh in the development and progression of gastric cancer specifically is largely unknown. Bone marrow-derived stem cells, specifically mesenchymal stem cells (MSCs) infiltrate and engraft into the gastric mucosa in response to the chronic inflammatory environment of Helicobacter infection. In this review, MSC infiltration and changes in the cytokine and cellular profiles of later-stage chronic environments will be tied into their interactions with the Shh pathway. We will discuss how these changes shape tumorigenesis and tumor progression in the gastric mucosa. The current review focuses on the Shh signaling pathway and its role in the development of gastric cancer, specifically in response to Helicobacter pylori infection. We follow with an in-depth discussion of the regulation of the Hedgehog pathway during acute and chronic gastric inflammation with a focus on signaling within the MSC compartment.