Hedgehog signaling is involved in regulation of ovarian function in Drosophila, but its role in regulating mammalian ovarian folliculogenesis is less clear. Therefore, gene expression of Indian hedgehog (IHH) and its type 1 receptor, patched 1 (PTCH1), were quantified in bovine granulosa (GC) or theca (TC) cells of small (1–5 mm) antral follicles by in situ hybridization and of larger (5–17 mm) antral follicles by real-time RT-PCR from ovaries of cyclic cows genetically selected (Twinner) or not selected (control) for twin ovulations. Expression of IHH mRNA was localized to GC and cumulus cells, whereas PTCH1 mRNA was greater in TC than in GC. Estrogen-active (E-A; follicular fluid concentration of estradiol > progesterone) versus estrogen-inactive follicles had a greater abundance of mRNA for IHH in GC and PTCH1 in TC. Abundance of IHH mRNA in GC was not affected by cow genotype, whereas TC PTCH1 mRNA was less in large E-A follicles of Twinners than in controls. In vitro, estradiol and wingless-type (WNT) 3A increased IHH mRNA in IGF1-treated GC. IGF1 and BMP4 treatments decreased PTCH1 mRNA in small TC. Estradiol and LH increased PTCH1 mRNA in IGF1-treated TC from large and small follicles, respectively. In summary, functional status of ovarian follicles was associated with differences in hedgehog signaling in GC and TC. We hypothesize that as follicles grow and develop, increased free IGF1 may suppress expression of IHH mRNA by GC and PTCH1 mRNA by TC, and these effects are regulated in a paracrine way by estradiol and other intra- and extragonadal factors.