The emergence of mutations in tyrosine kinases following treatment of cancer patients with molecular-targeted therapy represents a major mechanism of acquired drug resistance. Here, we describe a mutation in the serpentine receptor, Smoothened (SMO), which results in resistance to a Hedgehog (Hh) pathway inhibitor in medulloblastoma. A single amino acid substitution in a conserved glutamic acid residue of SMO maintains Hh signaling, but results in the inability of the Hh pathway inhibitor, GDC-0449, to bind SMO and suppress the pathway. The invention provides screening methods to detect SMO mutations and methods to screen for drugs that specifically modulate mutant SMO exhibiting drug resistance.