The sexual dimorphic position of the gonads in mammals is dependent on differential development of two ligaments, the cranial suspensory ligament (CSL) and the gubernaculum. During male embryogenesis, outgrowth of the gubernaculum and regression of the CSL result in transabdominal descent of the testes, whereas in the female, development of the CSL in conjunction with failure of the gubernaculum development holds the ovaries in a position lateral to the kidneys. Several lines of evidence suggest that regression of the CSL and induction of gubernaculum development are mediated by testosterone and a yet unidentified testicular factor, respectively. The Insl3 gene (originally designated Ley I-L), a member of the insulin-like superfamily, is specifically expressed in Leydig cells of the fetal and postnatal testis and in theca cells of the postnatal ovary. Here we show that male mice homozygous for a targeted deletion of the Insl3 locus exhibit bilateral cryptorchidism with free moving testes and genital ducts. These malformations are due to failure of gubernaculum development during embryogenesis. In double-mutant male mice for Insl3 and androgen receptor genes, testes are positioned adjacent to the kidneys and steadied in the abdomen by the CSL. These findings demonstrate, that the Insl3 induces gubernaculum development in an androgen-independent way, while androgen-mediated regression of the CSL occurs independently from Insl3.