T he type I IFNs (IFN-α and IFN-β), which are crucial in antiviral defense and immune regulation, signal via the Janus kinase/signal transducer and activator of transcription (JAK/STAT) pathway with activation of STAT1 and STAT2. Here, the function of STAT2 was studied in transgenic mice (termed GIFN/STAT2^–/–) with CNS production of IFN-α. Surprisingly, GIFN/STAT2^–/–, but not GIFN/STAT1-null, transgenic mice, with CNS production of IFN-α, died prematurely with medulloblastoma. An immune response also induced in the brain of the GIFN/STAT2^–/– mice was associated with IFN-γ gene expression by CD3⁺ T cells and the activation of the STAT1, STAT3, STAT4, and STAT5 molecules. Expression of the Sonic hedgehog (Shh) and the downstream transcriptional factor Gli-1 genes, implicated in the pathogenesis of medulloblastoma, was found to be significantly increased and cotranscribed in cerebellar granule neurons of the GIFN/STAT2^–/– mice. IFN-γ, but not IFN-α, induced STAT1-dependent expression of the Shh gene in cultured cerebellar granule neurons. Thus, there is an unexpected and extraordinarily adverse biological potency of IFN-α in the CNS when the primary signal transduction molecule STAT2 is absent. Moreover, a hitherto unknown role is indicated for the immune system in the pathogenesis of developmental disorders and tumorigenesis of the CNS via dysregulated Shh signaling mediated by IFN-γ.