Skin is a highly plastic tissue that undergoes tissue turnover throughout life, but also in response to injury. YAP and Hedgehog signalling play a central role in the control of epidermal stem/progenitor cells in the skin during embryonic development, in postnatal tissue homeostasis and in skin carcinogenesis. However, the genetic contexts in which they act to control tissue homeostasis remain mostly unresolved. We provide compelling evidence that epidermal YAP and Hedgehog/GLI2 signalling undergo positive regulatory interactions in the control of normal epidermal homeostasis and in basal cell carcinoma (BCC) development, which in the large majority of cases is caused by aberrant Hedgehog signalling activity. We report increased nuclear YAP and GLI2 activity in the epidermis and BCCs of K14-CreER/Rosa-SmoM2 transgenic mouse skin, accompanied with increased ROCK signalling and ECM remodelling. Furthermore, we found that epidermal YAP activity drives GLI2 nuclear accumulation in the skin of YAP2-5SA-ΔC mice, which depends on epidermal β-catenin activation. Lastly, we found prominent nuclear activity of GLI2, YAP and β-catenin, concomitant with increased ROCK signalling and stromal fibrosis in human BCC. Our work provides novel insights into the molecular mechanisms underlying the interplay between cell signalling events and mechanical force in normal tissue homeostasis in vivo, that could potentially be perturbed in BCC development.