The zebrafish has become an important model for cancer research. Several cancer models have been established by transgenic expression of human or mouse oncogenes in zebrafish. Since it is amenable to efficient transgenesis, zebrafish have immense potential to be used for studying interaction of oncogenes and pathways at the organismal level. Using the Gal4VP16-UAS binary transgenic expression approach, we established stable transgenic lines expressing an EGFP fusion protein of an activated zebrafish Smoothened (Smoa1-EGFP). Expression of the zebrafish Smoa1-EGFP itself did not lead to tumor formation either in founder fish or subsequent generations, however, co-expressing a constitutively active human AKT1 resulted in several tumor types, including spindle cell sarcoma, rhabdomyoma, ocular melanoma, astrocytoma, and myxoma. All tumor types showed GFP expression and increased Patched 1 levels, suggesting involvement of zebrafish Smoa1 in tumorigenesis. Immunofluorescence studies showed that tumors also expressed elevated levels of phosphorylated AKT, indicating activation of the PI3K-AKT pathway. These results suggest that co-activation of the hedgehog and AKT pathways promote tumorigenesis, and that the binary transgenic approach is a useful tool for studying interaction of oncogenes and oncogenic pathways in zebrafish.