Atypical teratoid/rhabdoid tumor (ATRT) is an aggressive central nervous system tumor characterized by loss of SMARCB1/INI1 protein expression and comprises three distinct molecular groups, ATRT–TYR, ATRT–MYC and ATRT–SHH. ATRT–SHH represents the largest molecular group and is heterogeneous with regard to age, tumor location and epigenetic profile. We, therefore, aimed to investigate if heterogeneity within ATRT–SHH might also have biological and clinical importance. Consensus clustering of DNA methylation profiles and confirmatory t-SNE analysis of 65 ATRT–SHH yielded three robust molecular subgroups, i.e., SHH-1A, SHH-1B and SHH-2. These subgroups differed by median age of onset (SHH-1A: 18 months, SHH-1B: 107 months, SHH-2: 13 months) and tumor location (SHH-1A: 88% supratentorial; SHH-1B: 85% supratentorial; SHH-2: 93% infratentorial, often extending to the pineal region). Subgroups showed comparable SMARCB1 mutational profiles, but pathogenic/likely pathogenic SMARCB1 germline variants were over-represented in SHH-2 (63%) as compared to SHH-1A (20%) and SHH-1B (0%). Protein expression of proneural marker ASCL1 (enriched in SHH-1B) and glial markers OLIG2 and GFAP (absent in SHH-2) as well as global mRNA expression patterns differed, but all subgroups were characterized by overexpression of SHH as well as Notch pathway members. In a Drosophila model, knockdown of Snr1 (the fly homologue of SMARCB1) in hedgehog activated cells not only altered hedgehog signaling, but also caused aberrant Notch signaling and formation of tumor-like structures. Finally, on survival analysis, molecular subgroup and age of onset (but not ASCL1 staining status) were independently associated with overall survival, older patients (> 3 years) harboring SHH-1B experiencing relatively favorable outcome. In conclusion, ATRT–SHH comprises three subgroups characterized by SHH and Notch pathway activation, but divergent molecular and clinical features. Our data suggest that molecular subgrouping of ATRT–SHH has prognostic relevance and might aid to stratify patients within future clinical trials.