The inhibition of MyoD expression is important for obtaining muscle progenitors that can replenish the satellite cell niche during muscle repair. Progenitors could be derived from either embryonic stem cells or satellite cells. Hedgehog (Hh) signaling is important for MyoD expression during embryogenesis and adult muscle regeneration. To date, the mechanistic understanding of MyoD regulation by Hh signaling is unclear. Here, we demonstrate that the Hh effector, Gli2, regulates MyoD expression and associates with MyoD gene elements. Gain- and loss-of-function experiments in pluripotent P19 cells show that Gli2 activity is sufficient and required for efficient MyoD expression during skeletal myogenesis. Inhibition of Hh signaling reduces MyoD expression during satellite cell activation in vitro. In addition to regulating MyoD expression, Hh signaling regulates MyoD transcriptional activity, and MyoD activates Hh signaling in myogenic conversion assays. Finally, Gli2, MyoD, and MEF2C form a protein complex, which enhances MyoD activity on skeletal muscle-related promoters. We therefore link Hh signaling to the function and expression of MyoD protein during myogenesis in stem cells.