Although positive and negative signals control neurogenesis in the embryo, factors regulating postnatal proliferation are less well characterized. In the vertebrate cerebellum, Sonic Hedgehog (Shh) is an efficacious mitogen for cerebellar granule neuron precursors (GNPs), and mutations activating the Shh pathway are linked to medulloblastoma, a tumor derived from GNPs. Although the mitogenic effects of Shh can be blocked by increasing cAMP or protein kinase A activity, the physiological factors antagonizing this stimulation are undefined. In the embryo, pituitary adenylate cyclase-activating polypeptide (PACAP) receptor 1 (PAC1) signaling regulates neural precursor proliferation. We now show that in the developing cerebellum, PAC1 mRNA colocalizes with gene transcripts for Shh receptor Patched 1 and target gene Gli1 in the external germinal layer. We consequently investigated the interactions of PACAP and Shh in proliferation of purified GNPs in culture. Shh exhibited mitogenic activity in both rat and mouse cultures, stimulating DNA synthesis approximately 10-fold after 48 hr of exposure. PACAP markedly inhibited Shh-induced thymidine incorporation by 50 and 85% in rat and mouse GNPs, respectively, but did not significantly affect the stimulation induced by other mitogens. This selective effect was reproduced by the specific PAC1 agonist maxadilan, as well as by the adenylate cyclase activator forskolin, suggesting that PAC1 provides a potent inhibitory signal for Shh-induced proliferation in developing cerebellum. In contrast, in the absence of Shh, PACAP and maxadilan modestly stimulated DNA synthesis, an effect reproduced by activating protein kinase C. These observations suggest that G-protein-coupled receptors, such as PAC1, serve as sensors of environmental cues, coordinating diverse neurogenetic signals.