B-Raf kinase inhibitors such as vemurafenib (PLX4032) and dabrafenib have limited therapeutic efficacy on BRAF-mutated thyroid cancer. Cancer stem cells (CSCs) play important roles in tumor recurrence, drug resistance, and metastasis. Whether CSCs play a role in dampening the antitumor activity of B-Raf kinase inhibitors remains unknown. Here, we report that vemurafenib (PLX4032) induced the expression of several stemness-related genes including Gli1, Snail, BMI1, and SOX2 in two anaplastic thyroid cancer cell lines, SW1736 and 8505C, but decreased the expression of these genes in A375 cells, a human melanoma cell line. PLX4032 promoted thyroid cancer stem cell self-renewal, as evidenced by increased numbers of aldehyde dehydrogenase-positive cells and thyrospheres. Mechanistically, PLX4032 activates the PI-3 and mitogen-activated protein kinase pathways through HER3 to cross-activate Gli1, a transcription factor of the sonic hedgehog (Shh) pathway. GANT61, a specific inhibitor of Gli1, blocked the expression of the stemness-related genes in PLX4032-treated thyroid cancer cells in vitro and in vivo in two thyroid cancer xenograft models. GANT61 treatment alone weakly inhibited SW1736 tumor growth but enhanced the antitumor activity of PLX4032 when used in combination. Our study provides mechanistic insights into how thyroid cancer poorly responds to B-Raf kinase inhibitors and suggests that targeting B-Raf and the Shh pathway in combination may overcome thyroid cancer drug resistance.