Hedgehog (Hh) proteins and cAMP-dependent protein kinase A (PKA) generally play opposing roles in developmental patterning events. Humans and mice heterozygous for mutations in the sonic hedgehog (Shh) receptor gene patched-1 (ptc1) have an increased incidence of certain types of cancer, including medulloblastoma (MB), a highly aggressive tumor of the cerebellum. Despite the importance of PKA in Hh signaling, little is known about how PKA activity is regulated in the context of Hh signaling, or the consequences of improper regulation. One molecule that can influence PKA activity is pituitary adenylyl cyclase-activating peptide (PACAP), which has been shown to regulate cerebellar granule precursor proliferation in vitro, a cell population thought to give rise to MB. To test for a PACAP/Hh interaction in the initiation or propagation of these tumors, we introduced a PACAP mutation into ptc1 mutant mice. Deletion of a single copy of PACAP increased MB incidence approximate 2.5-fold, to 66%, thereby demonstrating that PACAP exerts a powerful inhibitory action on the induction, growth or survival of these tumors. Tumors from PACAP/ptc1 mutant mice retained PACAP receptor gene expression, and exhibited superinduction of Hh target genes compared to those from ptc1+/- mice. Moreover, PACAP inhibited proliferation of cell lines derived from tumors in a PKA-dependent manner, and inhibited expression of the Hh target gene gli1. The results provide genetic evidence that PACAP acts as a physiological factor that regulates the pathogenesis of Hh pathway-associated MB tumors.