Hedgehog (HH) signaling is involved in many physiological processes, and pathway deregulation can result in a wide range of malignancies. Glioma‐associated oncogene 1 (GLI1) is a transcription factor and a terminal effector of the HH cascade. Despite its crucial role in tumorigenesis, our understanding of the GLI1 cellular targets is quite limited. In this study, we identified multiple new GLI1 target genes using a combination of different genomic surveys and then subjected them to in‐depth validation in human cancer cell lines. We were able to validate >90% of the new targets, which were enriched in functions involved in neurogenesis and regulation of transcription, in at least one type of follow‐up experiment. Strikingly, we found that RNA editing of GLI1 can modulate effects on the targets. Furthermore, one of the top targets, FOXS1, a gene encoding a transcription factor previously implicated in nervous system development, was shown to act in a negative feedback loop limiting the cellular effects of GLI1 in medulloblastoma and rhabdomyosarcoma cells. Moreover, FOXS1 is both highly expressed and positively correlated with GLI1 in medulloblastoma samples of the Sonic HH subgroup, further arguing for the existence of FOXS1/GLI1 interplay in human tumors. Consistently, high FOXS1 expression predicts longer relapse‐free survival in breast cancer. Overall, our findings open multiple new avenues in HH signaling pathway research and have potential for translational implications.