Through their biased localization and function within the cell, polarity complex proteins are necessary to establish the cellular asymmetry required for tissue organization. Well-characterized germinal zones, mitogenic signals and cell types make the cerebellum an excellent model for addressing the crucial function of polarity complex proteins in the generation and organization of neural tissues. Deletion of the apical polarity complex protein Pals1 in the developing cerebellum results in a remarkably undersized cerebellum with disrupted layers in poorly formed folia and strikingly reduced granule cell production. We demonstrate that Pals1 is not only essential for cerebellum organogenesis, but also for preventing premature differentiation and thus maintaining progenitor pools in cerebellar germinal zones, including cerebellar granule neuron precursors in the external granule layer. In the Pals1 mouse mutants, the expression of genes that regulate the cell cycle was diminished, correlating with the loss of the proliferating cell population of germinal zones. Furthermore, enhanced Shh signaling through activated Smo cannot overcome impaired cerebellar cell generation, arguing for an epistatic role of Pals1 in proliferation capacity. Our study identifies Pals1 as a novel intrinsic factor that regulates the generation of cerebellar cells and Pals1 deficiency as a potential inhibitor of overactive mitogenic signaling.