The molecular bases of brain development and CNS malignancies remain poorly understood. Here we show that Sonic hedgehog (Shh) signaling controls the development of the cerebellum at multiple levels. SHH is produced by Purkinje neurons, it is required for the proliferation of granule neuron precursors and it induces the differentiation of Bergmann glia. Blocking SHH function in vivo results in deficient granule neuron and Bergmann glia differentiation as well as in abnormal Purkinje neuron development. Thus, our findings provide a molecular model for the growth and patterning of the cerebellum by SHH through the coordination of the development of cortical cerebellar cell types. In addition, they provide a cellular context for medulloblastomas, childhood cancers of the cerebellum.