Reversible phosphorylation of Suppressor of fused (Sufu) is essential for Sonic Hedgehog (Shh) signal transduction. Sufu is stabilized under dual phosphorylation of protein kinase A (PKA) and glycogen synthase kinase 3β (GSK3β). Its phosphorylation is reduced with the activation of Shh signaling. However, the phosphatase in this reversible phosphorylation has not been found. Taking advantage of a proteomic approach, we identified Protein phosphatase 4 regulatory subunit 2 (Ppp4r2), an interacting protein of Sufu. Shh signaling promotes the interaction of these two proteins in the nucleus, and Ppp4 also promotes dephosphorylation of Sufu, leading to its degradation and enhancing the Gli1 transcriptional activity. Finally, Ppp4-mediated dephosphorylation of Sufu promotes proliferation of medulloblastoma tumor cells, and expression of Ppp4 is positively correlated with up-regulation of Shh pathway target genes in the Shh-subtype medulloblastoma, underscoring the important role of this regulation in Shh signaling.