The Hedgehog-regulated transcription factors GLI1 and GLI2 play overlapping roles in development and disease; however, the mechanisms underlying their interplay remain elusive. We report for the first time that GLI1 and GLI2 physically and functionally interact in cancer cells. GLI1 and GLI2 were shown to co-immunoprecipitate in PANC1 pancreatic cancer cells and RMS13 rhabdomyosarcoma cells. Mapping analysis demonstrated that the zinc finger domains of both proteins are required for their heteromerization. RNAi knockdown of either GLI1 or GLI2 inhibited expression of many well-characterized GLI target genes (BCL2, MYCN, PTCH2, IL7 and CCND1) in PANC1 cells, whereas PTCH1 expression was only inhibited by GLI1 depletion. qPCR screening of a large set of putative canonical and non-canonical Hedgehog/GLI targets identified further genes (e.g. E2F1, BMP1, CDK2) strongly down-regulated by GLI1 and/or GLI2 depletion in PANC1 cells, and demonstrated that ANO1, AQP1 and SOCS1 are up-regulated by knockdown of either GLI1 or GLI2. Chromatin immunoprecipitation showed that GLI1 and GLI2 occupied the same regions at the BCL2, MYCN and CCND1 promoters. Furthermore, depletion of GLI1 inhibited GLI2 occupancy at these promoters, suggesting that GLI1/GLI2 interaction is required for the recruitment of GLI2 to these sites. Together, these findings indicate that GLI1 and GLI2 co-ordinately regulate the transcription of some genes, and provide mechanistic insight into the roles of GLI proteins in carcinogenesis.