The type I IFNs (IFN-alpha and IFN-beta), which are crucial in antiviral defense and immune regulation, signal via the Janus kinase/signal transducer and activator of transcription (JAK/STAT) pathway with activation of STAT1 and STAT2. Here, the function of STAT2 was studied in transgenic mice (termed GIFN/STAT2-/-) with CNS production of IFN-alpha. Surprisingly, GIFN/STAT2-/-, but not GIFN/STAT1-null, transgenic mice, with CNS production of IFN-alpha, died prematurely with medulloblastoma. An immune response also induced in the brain of the GIFN/STAT2-/- mice was associated with IFN-gamma gene expression by CD3+ T cells and the activation of the STAT1, STAT3, STAT4, and STAT5 molecules. Expression of the Sonic hedgehog (Shh) and the downstream transcriptional factor Gli-1 genes, implicated in the pathogenesis of medulloblastoma, was found to be significantly increased and cotranscribed in cerebellar granule neurons of the GIFN/STAT2-/- mice. IFN-gamma, but not IFN-alpha, induced STAT1-dependent expression of the Shh gene in cultured cerebellar granule neurons. Thus, there is an unexpected and extraordinarily adverse biological potency of IFN-alpha in the CNS when the primary signal transduction molecule STAT2 is absent. Moreover, a hitherto unknown role is indicated for the immune system in the pathogenesis of developmental disorders and tumorigenesis of the CNS via dysregulated Shh signaling mediated by IFN-gamma.