The sonic hedgehog (SHH) signaling pathway directs the embryonic development of diverse organisms and is disrupted in a variety of malignancies. Pathway activation is triggered by binding of hedgehog proteins to the multipass Patched-1 (PTCH) receptor, which in the absence of hedgehog suppresses the activity of the seven-pass membrane protein Smoothened (SMOH). De-repression of SMOH culminates in the activation of one or more of the GLI transcription factors that regulate the transcription of downstream targets. Individuals with germline mutations of the SHH receptor gene PTCH are at high risk of developmental anomalies and of basal-cell carcinomas, medulloblastomas and other cancers (a pattern consistent with nevoid basal-cell carcinoma syndrome, NBCCS). In keeping with the role of PTCH as a tumor-suppressor gene, somatic mutations of this gene occur in sporadic basal-cell carcinomas and medulloblastomas. We report here that a subset of children with medulloblastoma carry germline and somatic mutations in SUFU (encoding the human suppressor of fused) of the SHH pathway, accompanied by loss of heterozygosity of the wildtype allele. Several of these mutations encode truncated proteins that are unable to export the GLI transcription factor from nucleus to cytoplasm, resulting in the activation of SHH signaling. SUFU is a newly identified tumor-suppressor gene that predisposes individuals to medulloblastoma by modulating the SHH signaling pathway through a newly identified mechanism.