SUFU alterations are common in human Sonic Hedgehog (SHH) subgroup medulloblastoma (MB). However, its tumorigenic mechanisms have remained elusive. Here, we report that loss of Sufu alone is unable to induce MB formation in mice, due to insufficient Gli2 activation. Simultaneous loss of Spop, an E3 ubiquitin ligase targeting Gli2, restores robust Gli2 activation and induces rapid MB formation in Sufu knockout background. We also demonstrated a tumor-promoting role of Sufu in Smo-activated MB (∼60% of human SHH MB) by maintaining robust Gli activity. Having established Gli2 activation as a key driver of SHH MB, we report a comprehensive analysis of its targetome. Furthermore, we identified Atoh1 as a target and molecular accomplice of Gli2 that activates core SHH MB signature genes in a synergistic manner. Overall, our work establishes the dual role of SUFU in SHH MB and provides mechanistic insights into transcriptional regulation underlying Gli2-mediated SHH MB tumorigenesis.