Basal cell carcinoma, the most frequent human skin cancer, arises from activating hedgehog (HH) pathway mutations; however, little is known about the temporal changes that occur in tumour-initiating cells from the first oncogenic hit to the development of invasive cancer. Using an inducible mouse model enabling the expression of a constitutively active Smoothened mutant (SmoM2) in the adult epidermis, we carried out transcriptional profiling of SmoM2-expressing cells at different times during cancer initiation. We found that tumour-initiating cells are massively reprogrammed into a fate resembling that of embryonic hair follicle progenitors (EHFPs). Wnt/ β-catenin signalling was very rapidly activated following SmoM2 expression in adult epidermis and coincided with the expression of EHFP markers. Deletion of β-catenin in adult SmoM2-expressing cells prevents EHFP reprogramming and tumour initiation. Finally, human basal cell carcinomas also express genes of the Wnt signalling and EHFP signatures.