The Hedgehog (Hh) pathway regulates proliferation in a variety of tissues, however its specific effects on the cell cycle are unclear. During retinal proliferation in particular, the role of Hh has been controversial, with studies variably suggesting a stimulatory or an inhibitory effect on proliferation. Our recent data provide an underlying mechanism, which reconciles these different views. We showed that Hh signaling in the retina accelerates the G(1) and G(2) phases of the cell cycle and then pushes these rapidly dividing cells out of the cell cycle prematurely. From this and other evidence, we propose that Hh converts quiescent retinal stem cells into fast-cycling transient amplifying progenitors that are closer to cell cycle exit and differentiation. This is, we suggest, likely to be a general role of Hh in the nervous system and other tissues. This function of Hh in cell cycle kinetics and cell cycle exit may have implications for tumorigenesis and brain evolution.