Chronic intermittent hypoxia and hedgehog (Hh) pathway dysregulation are associated with nonalcoholic fatty liver disease (NAFLD) progression. In this study, we determined the relationship between obstructive sleep apnea (OSA)/nocturnal hypoxia and Hh signaling in pediatric NAFLD. Adolescents with histologic NAFLD (n = 31) underwent polysomnogram testing, laboratory testing, and Sonic Hh (SHh), Indian hedgehog (IHh), glioblastoma-associated oncogene 2 (Gli2), keratin 7 (K7), α-smooth muscle actin (α-SMA), and hypoxia-inducible factor 1α (HIF-1α) immunohistochemistry. Aspartate aminotransferase (AST) correlated with SHh, r = 0.64; Gli2, r = 0.4; α-SMA, r = 0.55; and K7, r = 0.45 (P < 0.01), as did alanine aminotransferase (ALT) (SHh, r = 0.51; Gli2, r = 0.43; α-SMA, r = 0.51; P < 0.02). SHh correlated with NAFLD activity score (r = 0.39), whereas IHh correlated with inflammation (r = -0.478) and histologic grade (r = -0.43); P < 0.03. Subjects with OSA/hypoxia had higher SHh (4.0 ± 2.9 versus 2.0 ± 1.5), Gli2 (74.2 ± 28.0 versus 55.8 ± 11.8), and α-SMA (6.2 ± 3.3 versus 4.3 ± 1.2); compared to those without (P < 0.03). OSA severity correlated with SHh (r = 0.31; P = 0.09) and Gli2 (r = 0.37; P = 0.04) as did hypoxia severity, which was associated with increasing SHh (r = -0.53), Gli2 (r = -0.52), α-SMA (r = -0.61), and K7 (r = -0.42); P < 0.02. Prolonged O2 desaturations <90% also correlated with SHh (r = 0.55) and Gli2 (r = 0.61); P < 0.05. Conclusion: The Hh pathway is activated in pediatric patients with NAFLD with nocturnal hypoxia and relates to disease severity. Tissue hypoxia may allow for functional activation of HIF-1α, with induction of genes important in epithelial-mesenchymal transition, including SHh, and NAFLD progression.