Hedgehog (Hh) signaling has been shown to be involved in regulating both intact and injured peripheral nerves. Therefore, it is critical to understand how Hh signaling is regulated in the peripheral nerve. One of the transcription factors of the Hh signaling pathway, Gli3, functions as both a repressor and an activator of Hh signaling activity. However, it remains unclear whether Gli3 is involved in controlling the intact and/or injured peripheral nerves. We found that Gli3 act as a repressor in the Schwann cells (SCs) of intact sciatic nerves. Although Dhh and Ptch1 expression were present, Hh signaling was not activated in these SCs. Moreover, heterozygous Gli3 mutation (Gli3-/+) induced ectopic Hh signaling activity in SCs. Hh signaling was thus suppressed by Gli3 in the SCs of intact sciatic nerves. Minor morphological changes were observed in the intact nerves from Gli3-/+ mice. Gli3 expression was significantly decreased following injury and ligand expression switched from Dhh to Shh, which activated Hh signaling in SCs from wild-type mice. Changes of these ligands was found to be important for nerve regeneration in which the downregulation of Gli3 was also involved. In fact, Gli3-/+ mice exhibited accelerated ligand switching and subsequent nerve regeneration. Both suppression of Hh signaling with Gli3 in the intact nerves and activation of Hh signaling without Gli3 in the injured nerve were observed in the SCs in an autocrine manner. Thus, Gli3 is a key factor in the control of intact peripheral nerve homeostasis and nerve regeneration.