Background Aberrant activation of the Hedgehog pathway drives tumorigenesis of many cancers, including glioblastoma. However, the sensitization mechanism of the G protein-coupled-like receptor smoothened (SMO), a key component of Hedgehog signaling, remains largely unknown. Results In this study, we describe a novel protein SMO-193a.a. that is essential for Hedgehog signaling activation in glioblastoma. Encoded by circular SMO (circ-SMO), SMO-193a.a. is required for sonic hedgehog (Shh) induced SMO activation, via interacting with SMO, enhancing SMO cholesterol modification, and releasing SMO from the inhibition of patched transmembrane receptors. Deprivation of SMO-193a.a. in brain cancer stem cells attenuates Hedgehog signaling intensity and suppresses self-renewal, proliferation in vitro, and tumorigenicity in vivo. Moreover, circ-SMO/SMO-193a.a. is positively regulated by FUS, a direct transcriptional target of Gli1. Shh/Gli1/FUS/SMO-193a.a. form a positive feedback loop to sustain Hedgehog signaling activation in glioblastoma. Clinically, SMO-193a.a. is more specifically expressed in glioblastoma than SMO and is relevant to Gli1 expression. Higher expression of SMO-193a.a. predicts worse overall survival of glioblastoma patients, indicating its prognostic value. Conclusions Our study reveals that SMO-193a.a., a novel protein encoded by circular SMO, is critical for Hedgehog signaling, drives glioblastoma tumorigenesis and is a novel target for glioblastoma treatment.