Although the biological role of KRAS is clearly established in carcinogenesis, the molecular mechanisms underlying this phenomenon are not completely understood. In this study, we provide evidence of a novel signaling network regulated by the transcription factor GLI1 mediating KRAS-induced carcinogenesis. Using pancreatic cancer (a disease with high prevalence of KRAS mutations) as a model, we show that loss of GLI1 blocks the progression of KRAS-induced pancreatic preneoplastic lesions in mice with pancreas-specific Cre-activated oncogenic mutant kras. Mice lacking GLI1 develop only low-grade lesions at low frequency, and in most cases, the pancreata are histologically normal. Further characterization of the phenotype showed a decrease in the activation of STAT3 in pancreatic preneoplastic lesions; STAT3 is a transcription factor required for the development of premalignant lesions and their progression into pancreatic cancer. Analysis of the mechanisms revealed a key role for GLI1 in maintaining the levels of activated STAT3 through the modulation of IL-6 signaling. GLI1 binds to the IL-6 mouse promoter and regulates the activity and expression of this cytokine. This newly identified GLI1/IL-6 axis is active in fibroblasts, a known source of IL-6 in the tumor microenvironment. Sonic hedgehog induces GLI1 binding to the IL-6 promoter and increases IL-6 expression in fibroblasts in a paracrine manner. Finally, we demonstrate that mutant KRAS initiates this cascade by inducing the expression of Sonic hedgehog in cancer cells. Collectively, these results define a novel role for GLI1 in carcinogenesis acting as a downstream effector of oncogenic KRAS in the tumor microenvironment.