The mechanisms of retinoid activity in tumors remain largely unknown. Here we establish that retinoids cause extensive apoptosis of medulloblastoma cells. In a xenograft model, retinoids largely abrogated tumor growth. Using receptor-specific retinoid agonists, we defined a subset of mRNAs that were induced by all active retinoids in retinoid-sensitive cell lines. We also identified bone morphogenetic protein-2 (BMP-2) as a candidate mediator of retinoid activity. BMP-2 protein induced medulloblastoma cell apoptosis, whereas the BMP-2 antagonist noggin blocked both retinoid and BMP-2-induced apoptosis. BMP-2 also induced p38 mitogen-activated protein kinase (MAPK), which is necessary for BMP-2- and retinoid-induced apoptosis. Retinoid-resistant medulloblastoma cells underwent apoptosis when treated with BMP-2 or when cultured with retinoid-sensitive medulloblastoma cells. Retinoid-induced expression of BMP-2 is thus necessary and sufficient for apoptosis of retinoid-responsive cells, and expression of BMP-2 by retinoid-sensitive cells is sufficient to induce apoptosis in surrounding retinoid-resistant cells.