Nonalcoholic steatohepatitis (NASH) has the potential to progress to fibrosis, cirrhosis, and hepatocellular carcinoma. Upregulation of sonic hedgehog (Shh) has been documented in development of NASH through sustained cell stress. At the same time, transforming growth factor-β1 (TGF-β1), which is a central element in fibrogenic reactions in various diseases and sites, has been reported to be associated with hepatic inflammation and fibrotic reaction. To explore crosstalk between Shh and TGF-β1 in the development and progression of NASH, we investigated the expression of both these proteins in 135 human specimens of NASH, 35 fatty liver specimens, 35 specimens of alcoholic steatohepatitis with immunohistochemistry. Shh protein was expressed in the cytoplasm of ballooned hepatocytes with an ubiquitin-like pattern. In addition, a few scattered apoptotic hepatocytes in the inflammatory foci showed homogeneous cytoplasmic Shh expression. TGF-β1 protein was observed mainly in the activated hepatic stellate cells (HSCs) which were located in the inflammatory foci surrounding ballooned hepatocytes. Moreover, the mRNA levels of both Shh and TGF-β1 in the liver biopsy specimens from NASH patients was significantly increased compared with those in fatty liver patients. Statistically, there was a significant association of the expressions of Shh and TGF-β1 proteins in NASH (r=0.6, P<0.05). In addition, increased expression of Shh protein significantly parallels the severity of hepatocellular ballooning, lobular, and portal inflammatory responses and progression of fibrosis in NASH patients. Moreover, we found that much HSCs transformed into myofibroblast-like phenotype and migrated downward to HepG2 hepatocellular carcinoma cells with overexpression of Shh by transwell assay. We also observed overexpression of proteins of Shh and TGF-β1 in cultured activated HSCs with confocal microscopy. These findings strongly suggest there is interplay between Shh and TGF-β1 in hepatic inflammatory reactions. Shh secreted through damaged hepatocytes may result in activation of TGF-β1 and subsequent transformation of HSCs, which together modulate the progression of human NASH.