The tight control of gene expression at the level of both transcription and post-transcriptional RNA processing is essential for mammalian development. We here investigate the role of protein arginine methyltransferase 5 (PRMT5), a putative splicing regulator and transcriptional cofactor, in mammalian development. We demonstrate that selective deletion of PRMT5 in neural stem/progenitor cells (NPCs) leads to postnatal death in mice. At the molecular level, the absence of PRMT5 results in reduced methylation of Sm proteins, aberrant constitutive splicing, and the alternative splicing of specific mRNAs with weak 5′ donor sites. Intriguingly, the products of these mRNAs are, among others, several proteins regulating cell cycle progression. We identify Mdm4 as one of these key mRNAs that senses the defects in the spliceosomal machinery and transduces the signal to activate the p53 response, providing a mechanistic explanation of the phenotype observed in vivo. Our data demonstrate that PRMT5 is a master regulator of splicing in mammals and uncover a new role for the Mdm4 pre-mRNA, which could be exploited for anti-cancer therapy.