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Intercellular communication by the hedgehog cell signaling pathway is necessary for tooth development throughout the vertebrates, but it remains unclear which specific developmental signals control cell behavior at different stages of odontogenesis. To address this issue, we have manipulated hedgehog activity during zebrafish tooth development and visualized the results using confocal microscopy. Results: We first established that reporter lines for dlx2b, fli1, NF-κB, and prdm1a are markers for specific subsets of tooth germ tissues. We then blocked hedgehog signaling with cyclopamine and observed a reduction or elimination of the cranial neural crest derived dental papilla, which normally contains the cells that later give rise to dentin-producing odontoblasts. Upon further investigation, we observed that the dental papilla begins to form and then regresses in the absence of hedgehog signaling, through a mechanism unrelated to cell proliferation or apoptosis. We also found evidence of an isometric reduction in tooth size that correlates with the time of earliest hedgehog inhibition. Conclusions: We hypothesize that these results reveal a previously uncharacterized function of hedgehog signaling during tooth morphogenesis, regulating the number of cells in the dental papilla and thereby controlling tooth size.