Many developmental disorders are thought to arise from an interaction between genetic and environmental risk factors. The Hedgehog (HH) signaling pathway regulates myriad developmental processes, and pathway inhibition is associated with birth defects, including holoprosencephaly (HPE). Cannabinoids are HH pathway inhibitors, but little is known of their effects on HH-dependent processes in mammalian embryos, and their mechanism of action is unclear. We report that the psychoactive cannabinoid Δ9-tetrahydrocannabinol (THC) induces two hallmark HH loss-of-function phenotypes (HPE and ventral neural tube patterning defects) in Cdon mutant mice, which have a subthreshold deficit in HH signaling. THC therefore acts as a ‘conditional teratogen’, dependent on a complementary but insufficient genetic insult. In vitro findings indicate that THC is a direct inhibitor of the essential HH signal transducer smoothened. The canonical THC receptor, cannabinoid receptor-type 1, is not required for THC to inhibit HH signaling. Cannabis consumption during pregnancy may contribute to a combination of risk factors underlying specific developmental disorders. These findings therefore have significant public health relevance.