Li-Fraumeni syndrome (LFS) is a highly penetrant, autosomal dominant, human familial cancer predisposition. Although a key role for the tumor suppressor p53 has been implicated in LFS, the genetic and cellular mechanisms underpinning this disease remain unknown. Therefore, modeling LFS in a vertebrate system that is accessible to both large-scale genetic screens and in vivo cell biological studies will facilitate the in vivo dissection of disease mechanisms, help identify candidate genes, and spur the discovery of therapeutic compounds. Here, we describe a forward genetic screen in zebrafish embryos that was used to identify LFS candidate genes, which yielded a p53 mutant (p53^I166T) that as an adult develops tumors, predominantly sarcomas, with 100% penetrance. As in humans with LFS, tumors arise in heterozygotes and display loss of heterozygosity (LOH). This report of LOH indicates that Knudson’s two-hit hypothesis, a hallmark of human autosomal dominant cancer syndromes, can be modeled in zebrafish. Furthermore, as with some LFS mutations, the zebrafish p53^I166T allele is a loss-of-function allele with dominant-negative activity in vivo. Additionally, we demonstrate that the p53 regulatory pathway, including Mdm2 regulation, is evolutionarily conserved in zebrafish, providing a bona fide biological context in which to systematically uncover novel modifier genes and therapeutic agents for human LFS.