Aberrant activation of the Hedgehog (Hh) pathway can drive tumorigenesis. To investigate the mechanism by which glioma-associated oncogene family zinc finger-1 (GLI1), a crucial effector of Hh signaling, regulates Hh pathway activation, we searched for GLI1-interacting proteins. We report that the chromatin remodeling protein SNF5 (encoded by SMARCB1, hereafter called SNF5), which is inactivated in human malignant rhabdoid tumors (MRTs), interacts with GLI1. We show that Snf5 localizes to Gli1-regulated promoters and that loss of Snf5 leads to activation of the Hh-Gli pathway. Conversely, re-expression of SNF5 in MRT cells represses GLI1. Consistent with this, we show the presence of a Hh-Gli-activated gene expression profile in primary MRTs and show that GLI1 drives the growth of SNF5-deficient MRT cells in vitro and in vivo. Therefore, our studies reveal that SNF5 is a key mediator of Hh signaling and that aberrant activation of GLI1 is a previously undescribed targetable mechanism contributing to the growth of MRT cells.