Motivated behaviors and many psychopathologies typically involve changes in dopamine release from the projections of the ventral tegmental area (VTA) and/or the substantia nigra pars compacta (SNc). The morphogen Sonic Hedgehog (Shh) specifies fates of midbrain dopamine neurons, but VTA-specific effects of Shh signaling are also being uncovered. In this study, we assessed the role of the Shh receptor Cdon in the development of VTA and SNc dopamine neurons. We find that Cdon is expressed in the proliferating progenitor zone of the embryonic ventral midbrain and that the number of proliferating cells in this region is increased in mouse Cdon(-/-) embryos. Consistent with a role of Shh in the regulation of neuronal proliferation in this region, we find that the number of tyrosine hydroxylase (TH)-positive neurons is increased in the VTA of Cdon(-/-) mice at birth and that this effect endures into adulthood. In contrast, the number of TH-positive neurons in the SNc is not altered in Cdon(-/-) mice at either age. Moreover, adult Cdon(-/-) mice have a greater number of medial prefrontal cortex (mPFC) dopamine presynaptic sites, and increased baseline concentrations of dopamine and dopamine metabolites selectively in this region. Finally, consistent with increased dopamine function in the mPFC, we find that adult Cdon(-/-) mice fail to exhibit behavioral plasticity upon repeated amphetamine treatment. Based on these data, we suggest that Cdon plays an important role encoding the diversity of dopamine neurons in the midbrain, influencing both the development of the mesocortical dopamine pathway and behavioral outputs that involve this neural circuitry.