The hedgehog (Hh) signaling pathway is a key component of cross-talk during vertebrate gut development, involving endodermally secreted Sonic (Shh) and Indian hedgehog (Ihh) proteins that directly signal to adjacent mesoderm. Here we show that the closely linked mesenchymal forkhead transcription factors Foxf1 and Foxl1 are part of this signaling cascade. Analysis of conserved non-coding sequences surrounding Foxf1 and Foxl1 identified seven Gli binding sites, with two sites near Foxl1 being identical among mammalian, bird, fish, and amphibian species. In vitro experiments indicate that Gli2 binds to these Gli sites, several of which are critical for Gli2-mediated activation of a luciferase reporter in 293 cells. In addition, we demonstrate occupancy of one of these elements by Gli proteins in the intestine in vivo using chromatin immunoprecipitation. Furthermore, expression of both Foxf1 and Foxl1 is reduced in the Gli2/Gli3 mutant gut. These results provide compelling evidence that Foxf1 and Foxl1 are mediators of the Hh (endoderm) to mesoderm signaling pathway.