Basal cell carcinoma (BCC), the most common human cancer, results from aberrant activation of the Hedgehog signaling pathway. Although most cases of BCC are sporadic, some forms are inherited, such as Bazex-Dupré-Christol syndrome (BDCS) - a cancer-prone genodermatosis with an X-linked, dominant inheritance pattern. We have identified mutations in the ACTRT1 gene, which encodes actin-related protein T1 (ARP-T1), in two of the six families with BDCS that were examined in this study. High-throughput sequencing in the four remaining families identified germline mutations in noncoding sequences surrounding ACTRT1. These mutations were located in transcribed sequences encoding enhancer RNAs (eRNAs) and were shown to impair enhancer activity and ACTRT1 expression. ARP-T1 was found to directly bind to the GLI1 promoter, thus inhibiting GLI1 expression, and loss of ARP-T1 led to activation of the Hedgehog pathway in individuals with BDCS. Moreover, exogenous expression of ACTRT1 reduced the in vitro and in vivo proliferation rates of cell lines with aberrant activation of the Hedgehog signaling pathway. In summary, our study identifies a disease mechanism in BCC involving mutations in regulatory noncoding elements and uncovers the tumor-suppressor properties of ACTRT1.