High-level amplification of the protein phosphatase PPM1D (WIP1) is present in a subset of medulloblastomas (MBs) that have an expression profile consistent with active Sonic Hedgehog (SHH) signaling. We found that WIP1 overexpression increased expression of Shh target genes and cell proliferation in response to Shh stimulation in NIH3T3 and cerebellar granule neuron precursor cells in a p53-independent manner. Thus, we developed a mouse in which WIP1 is expressed in the developing brain under control of the Neurod2 promoter (ND2:WIP1). The external granule layer (EGL) in early postnatal ND2:WIP1 mice exhibited increased proliferation and expression of Shh downstream targets. MB incidence increased and survival decreased when ND2:WIP1 mice were crossed with an Shh-activated MB mouse model. Conversely, Wip1 knockout significantly suppressed MB formation in two independent mouse models of Shh-activated MB. Furthermore, Wip1 knockdown or treatment with a WIP1 inhibitor suppressed the effects of Shh stimulation and potentiated the growth inhibitory effects of SHH pathway-inhibiting drugs in Shh-activated MB cells in vitro. This suggests an important cross-talk between SHH and WIP1 pathways that accelerates tumorigenesis and supports WIP1 inhibition as a potential treatment strategy for MB.