Disruption of cerebellar granular neuronal precursor (GNP) maturation can result in defects in motor coordination and learning, or in medulloblastoma, the most common childhood brain tumor. The Sonic Hedgehog (Shh) pathway is important for GNP proliferation; however, the factors regulating the extent and timing of GNP proliferation, as well as GNP differentiation and migration are poorly understood. The p53 tumor suppressor has been shown to negatively regulate the activity of the Shh effector, Gli1, in neural stem cells; however, the contribution of p53 to the regulation of Shh signaling in GNPs during cerebellar development has not been determined. Here, we exploited a hypomorphic allele of Mdm2 (Mdm2(puro)), which encodes a critical negative regulator of p53, to alter the level of wild-type MDM2 and p53 in vivo. We report that mice with reduced levels of MDM2 and increased levels of p53 have small cerebella with shortened folia, reminiscent of deficient Shh signaling. Indeed, Shh signaling in Mdm2-deficient GNPs is attenuated, concomitant with decreased expression of the Shh transducers, Gli1 and Gli2. We also find that Shh stimulation of GNPs promotes MDM2 accumulation and enhances phosphorylation at serine 166, a modification known to increase MDM2-p53 binding. Significantly, loss of MDM2 in Ptch1(+/-) mice, a model for Shh-mediated human medulloblastoma, impedes cerebellar tumorigenesis. Together, these results place MDM2 at a major nexus between the p53 and Shh signaling pathways in GNPs, with key roles in cerebellar development, GNP survival, cerebellar foliation, and MB tumorigenesis.