Mutations in Patched (PTCH), encoding the Hedgehog (Hh) receptor, underlie Basal Cell Naevus syndrome (BCNS) and, in addition to tumor predisposition, are associated with a wide range of 'patterning' defects. The basis for the underlying patterning problems in Hh-dependent tissues in BCNS and their long-term consequences on tissue homeostasis are, however, not known. Hh signaling is required for normal growth and organization of the mammalian retina and we show that PtchlacZ+/- mice exhibit vitreoretinal abnormalities resembling those found in BCNS patients. The retinas of PtchlacZ+/- mice exhibit abnormal cell cycle regulation, which culminates in photoreceptor dysplasia and Müller cell-derived gliosis. In BCNS, the intraretinal glial response results in epiretinal membrane (ERM) formation, a proliferative and contractile response on the retinal surface. ERMs are a cause of significant visual loss in the general, especially elderly, population. We hypothesize that alteration of Müller cell Hh signaling may play a role in the pathogenesis of such age-related 'idiopathic' ERMs.