Tumor cells are characterized by unlimited proliferation and perturbed differentiation. Using single-cell RNA sequencing, we demonstrate that tumor cells in medulloblastoma (MB) retain their capacity to differentiate in a similar way as their normal originating cells, cerebellar granule neuron precursors. Once they differentiate, MB cells permanently lose their proliferative capacity and tumorigenic potential. Differentiated MB cells highly express NeuroD1, a helix-loop-helix transcription factor, and forced expression of NeuroD1 promotes the differentiation of MB cells. The expression of NeuroD1 in bulk MB cells is repressed by trimethylation of histone 3 lysine-27 (H3K27me3). Inhibition of the histone lysine methyltransferase EZH2 prevents H3K27 trimethylation, resulting in increased NeuroD1 expression and enhanced differentiation in MB cells, which consequently reduces tumor growth. These studies reveal the mechanisms underlying MB cell differentiation and provide rationales to treat MB (potentially other malignancies) by stimulating tumor cell differentiation.