CD4(+)CD25(+)FoxP3(+) regulatory T cells (Tregs) are exploited by mycobacteria to subvert the protective host immune responses. The Treg expansion in the periphery requires signaling by professional antigen presenting cells and in particularly dendritic cells (DC). However, precise molecular mechanisms by which mycobacteria instruct Treg expansion via DCs are not established. Here we demonstrate that mycobacteria-responsive sonic hedgehog (SHH) signaling in human DCs leads to programmed death ligand-1 (PD-L1) expression and cyclooxygenase (COX)-2-catalyzed prostaglandin E2 (PGE2) that orchestrate mycobacterial infection-induced expansion of Tregs. While SHH-responsive transcription factor GLI1 directly arbitrated COX-2 transcription, specific microRNAs, miR-324-5p and miR-338-5p, which target PD-L1 were downregulated by SHH signaling. Further, counter-regulatory roles of SHH and NOTCH1 signaling during mycobacterial-infection of human DCs was also evident. Together, our results establish that Mycobacterium directs a fine-balance of host signaling pathways and molecular regulators in human DCs to expand Tregs that favour immune evasion of the pathogen.