Hedgehog (Hh) signalling is important during embryonic development and adult tissue regeneration. Ectopic activation of Hh signalling leads to cancer formation and inhibitors of Hh signalling may be of therapeutic benefit. To date, studies have focused on the development of Smoothened (Smo) inhibitors, however these studies failed to address situations where Hh pathway activation occurs downstream of Smo. Here, we implemented a novel screening assay using the Gli-luciferase reporter expression in mammalian cells to identify antagonists and agonists of the Hh signalling pathway from a unique library of natural compounds derived from marine sponges. We have identified 18 inhibiting hits out of 504 extracts. Subsequent Gli-luciferase and quantitative RT-PCR (qRT-PCR) validation of these hits confirmed that three marine extract fractions resulted in down-regulation of downstream targets of Hh signalling, Ptch1 and Gli1. Further purifications of these fractions are anticipated to identify and characterise pure compounds with antagonistic activity. Additionally, in order to further define possible therapeutic intervention points we utilised siRNA knockdown using a phosphatase-siRNA library targeting 220 phosphatases to identify putative regulators of Hh signalling. We identified and validated via qRT-PCR six phosphatases that have negative and five phosphatases that have positive regulatory effects on the downstream effectors of Hh pathway. Interestingly, knockdown of Protein tyrosine phosphatase 1b (Ptp1b) demonstrated significant up-regulation of Hh target expression. In view of PTP1B’s growth inhibitory roles and its negative regulatory effect on Insulin, Leptin, IGF, EGF, PDGF receptors and oncogenic signalling, we hypothesise that PTP1B negatively regulates Hh pathway activity. Altogether, these studies will assist in the identification of new drug targets and development of better therapeutic agents to treat Hh-related cancers.