Glucocorticoids are used for treating preterm neonatal infants suffering from life-threatening lung, airway, and cardiovascular conditions. However, several studies have raised concerns about detrimental effects of postnatal glucocorticoid administration on the developing brain leading to cognitive impairment, cerebral palsy, and hypoplasia of the cerebellum, a brain region critical for coordination of movement and higher-order neurological functions. Previously, we showed that glucocorticoids inhibit Sonic hedgehog-Smoothened (Shh-Smo) signaling, the major mitogenic pathway for cerebellar granule neuron precursors. Conversely, activation of Shh-Smo in transgenic mice protects against glucocorticoid-induced neurotoxic effects through induction of the 11β-hydroxysteroid dehydrogenase type 2 (11β-HSD2) pathway. Here, we show that systemic administration of a small-molecule agonist of the Shh-Smo pathway (SAG) prevented the neurotoxic effects of glucocorticoids. SAG did not interfere with the beneficial effects of glucocorticoids on lung maturation, and despite the known associations of the Shh pathway with neoplasia, we found that transient (1-week-long) SAG treatment of neonatal animals was well tolerated and did not promote tumor formation. These findings suggest that a small-molecule agonist of Smo has potential as a neuroprotective agent in neonates at risk for glucocorticoid-induced neonatal cerebellar injury.