Many genes initially identified for their roles in cell fate determination or signaling during development can have a significant impact on tumorigenesis. In the developing cerebellum, Sonic hedgehog (Shh) stimulates the proliferation of granule neuron precursor cells (GNPs) by activating the Gli transcription factors. Inappropriate activation of Shh target genes results in unrestrained cell division and eventually medulloblastoma, the most common pediatric brain malignancy. We find dramatic differences in the gene networks that are directly driven by the Gli1 transcription factor in GNPs and medulloblastoma. Gli1 binding location analysis revealed hundreds of genomic loci bound by Gli1 in normal and cancer cells. Only one third of the genes bound by Gli1 in GNPs were also bound in tumor cells. Correlation with gene expression levels indicated that 116 genes were preferentially transcribed in tumors, whereas 132 genes were target genes in both GNPs and medulloblastoma. Quantitative PCR and in situ hybridization for some putative target genes support their direct regulation by Gli. The results indicate that transformation of normal GNPs into deadly tumor cells is accompanied by a distinct set of Gli-regulated genes and may provide candidates for targeted therapies.