A subset of medulloblastomas, the most common brain tumor in children, is hypothesized to originate from granule neuron precursors (GNPs) in which the sonic hedgehog (SHH) pathway is over-activated. MXD3, a basic helix-look-helix zipper transcription factor of the MAD family, has been reported to be upregulated during postnatal cerebellar development and to promote GNP proliferation and MYCN expression. Mxd3 is upregulated in mouse models of medulloblastoma as well as in human medulloblastomas. Therefore, we hypothesize that MXD3 plays a role in the cellular events that lead to medulloblastoma biogenesis. In agreement with its proliferative role in GNPs, MXD3 knock-down in DAOY cells resulted in decreased proliferation. Sustained overexpression of MXD3 resulted in decreased cell numbers due to increased apoptosis and cell cycle arrest. Structure-function analysis revealed that the Sin3 interacting domain, the basic domain, and binding to E-boxes are essential for this activity. Microarray-based expression analysis indicated up-regulation of 84 genes and down-regulation of 47 genes. Potential direct MXD3 target genes were identified by ChIP-chip. Our results suggest that MXD3 is necessary for DAOY medulloblastoma cell proliferation. However, increased level and/or duration of MXD3 expression ultimately reduces cell numbers via increased cell death and cell cycle arrest.