Sonic hedgehog (Shh) determines cerebellar granule cell (GC) progenitor proliferation and medulloblastoma pathogenesis. However, the pathways regulating GC progenitors during embryogenesis before Shh production by Purkinje neurons and their roles in tumorigenesis remain unclear. The cilium-localized G-protein-coupled receptor Gpr161 suppresses Shh-mediated signaling in the neural tube. Here, by deleting Gpr161 in mouse neural stem cells or GC progenitors, we establish Gpr161 as a tumor suppressor in Shh subtype medulloblastoma. Irrespective of Shh production in the cerebellum, Gpr161 deletion increased downstream activity of the Shh pathway by restricting Gli3-mediated repression, causing more extensive generation and proliferation of GC progenitors. Moreover, earlier deletion of Gpr161 during embryogenesis increased tumor incidence and severity. GC progenitor overproduction during embryogenesis from Gpr161 deletion was cilium dependent, unlike normal development. Low GPR161 expression correlated with poor survival of SHH subtype medulloblastoma patients. Gpr161 restricts GC progenitor production by preventing premature and Shh-dependent pathway activity, highlighting the importance of basal pathway suppression in tumorigenesis.