The Hedgehog (Hh) signaling pathway plays a crucial role in embryogenesis and has been linked to the development of several human malignancies. The transcription factor Gli2 plays a key role in the transduction of Hh signals by modulating transcription of some Hh target genes, yet the mechanisms that control Gli2 protein expression are largely unknown. Here we report that β-transducin repeat-containing protein (β-TrCP) E3 ubiquitin ligase is required for Gli2 degradation. β-TrCP2 directly binds wild type Gli2 and promotes its ubiquitination. Single amino acid substitution in Gli2 putative binding site inhibits its interaction with β-TrCP2, its ubiquitination, and stabilizes the Gli2 protein. Stable Gli2 mutant is expressed in higher levels and is more potent in the activation of Gli-dependent transcription as compared with wild type Gli2. We also found that GLI2 protein is expressed highly in prostate cancer cell lines and primary tumors, whereas the level of GLI2 mRNA is not appreciably different in normal and neoplastic prostate. These data identify β-TrCP2 as a pivotal regulator of Gli2 expression and point to an important role for posttranslational modulation of GLI2 protein levels in Hh pathway-associated human prostate cancer.