Glucocorticoids (GCs) are administered to human fetuses at risk of premature delivery and to infants with life-threatening respiratory and cardiac conditions. However, there are ongoing concerns about adverse effects of GC treatment on the developing human brain, although the precise molecular mechanisms underlying GC-induced brain injury are unclear. Here, we identified what we believe to be novel cross-antagonistic interactions of Sonic hedgehog (Shh) and GC signaling in proliferating mouse cerebellar granule neuron precursors (CGNPs). Chronic GC treatment (from P0 through P7) in mouse pups inhibited Shh-induced proliferation and upregulation of expression of N-myc, Gli1, and D-type cyclin protein in CGNPs. Conversely, acute GC treatment (on P7 only) caused transient apoptosis. Shh signaling antagonized these effects of GCs, in part by induction of 11β-hydroxysteroid dehydrogenase type 2 (11βHSD2). Importantly, 11βHSD2 antagonized the effects of the GCs corticosterone, hydrocortisone, and prednisolone, but not the synthetic GC dexamethasone. Our findings indicate that Shh signaling is protective in the setting of GC-induced mouse neonatal brain injury. Furthermore, they led us to propose that 11βHSD2-sensitive GCs (e.g., hydrocortisone) should be used in preference to dexamethasone in neonatal human infants because of the potential for reduced neurotoxicity.