Neurogenesis impairment starting from early developmental stages is a key determinant of intellectual disability in Down syndrome (DS). Previous evidence provided a causal relationship between neurogenesis impairment and malfunctioning of the mitogenic Sonic Hedgehog (Shh) pathway. In particular, excessive levels of AICD (amyloid precursor protein intracellular domain), a cleavage product of the trisomic gene APP (amyloid precursor protein) up-regulate transcription of Ptch1 (Patched1), the Shh receptor that keeps the pathway repressed. Since AICD results from APP cleavage by γ-secretase, the goal of the current study was to establish whether treatment with a γ-secretase inhibitor normalizes AICD levels and restores neurogenesis in trisomic neural precursor cells. We found that treatment with a selective γ-secretase inhibitor (ELND006; ELN) restores proliferation in neurospheres derived from the subventricular zone (SVZ) of the Ts65Dn mouse model of DS. This effect was accompanied by reduction of AICD and Ptch1 levels and was prevented by inhibition of the Shh pathway with cyclopamine. Treatment of Ts65Dn mice with ELN in the postnatal period P3–P15 restored neurogenesis in the SVZ and hippocampus, hippocampal granule cell number and synapse development, indicating a positive impact of treatment on brain development. In addition, in the hippocampus of treated Ts65Dn mice there was a reduction in the expression levels of various genes that are transcriptionally regulated by AICD, including APP, its origin substrate. Inhibitors of γ-secretase are currently envisaged as tools for the cure of Alzheimer's disease because they lower βamyloid levels. Current results provide novel evidence that γ-secretase inhibitors may represent a strategy for the rescue of neurogenesis defects in DS.