SoxC transcription factors play critical roles in many developmental processes, including neurogenesis, cardiac formation, and skeletal differentiation. In vitro and in vivo loss-of-function studies have suggested that SoxC genes are required for oculogenesis; however the mechanism was poorly understood. Here, we have explored the function of the SoxC factor Sox4 during zebrafish eye development. We show that sox4a and sox4b are expressed in the forebrain and periocular mesenchyme adjacent to the optic stalk during early eye development. Knockdown of sox4 in zebrafish resulted in coloboma, a structural malformation of the eye that is a significant cause of pediatric visual impairment in humans, in which the choroid fissure fails to close. Sox4 morphants displayed altered proximo-distal patterning of the optic vesicle, including expanded pax2 expression in the optic stalk, as well as ectopic cell proliferation in the retina. We show that the abnormal ocular morphogenesis observed in Sox4-deficient zebrafish is caused by elevated Hedgehog (Hh) signaling, and this is due to increased expression of the Hh pathway ligand Indian Hedgehog b (ihhb). Consistent with these results, coloboma in sox4 morphants could be rescued by pharmacological treatment with the Hh inhibitor cyclopamine, or by co-knockdown of ihhb. Conversely, overexpression of sox4 reduced Hh signaling and ihhb expression, resulting in cyclopia. Finally, we demonstrate that sox4 and sox11 have overlapping, but not completely redundant, functions in regulating ocular morphogenesis. Taken together, our data demonstrate that Sox4 is required to limit the extent of Hh signaling during eye development, and suggest that mutations in SoxC factors could contribute to the development of coloboma.