Although the sex-determining gene Sry has been identified in mammals, no comparable genes have been found in non-mammalian vertebrates. Here, we used recombinant breakpoint analysis to restrict the sex-determining region in medaka fish (Oryzias latipes) to a 530-kilobase (kb) stretch of the Y chromosome. Deletion analysis of the Y chromosome of a congenic XY female further shortened the region to 250 kb. Shotgun sequencing of this region predicted 27 genes. Three of these genes were expressed during sexual differentiation. However, only the DM-related PG17 was Y specific; we thus named it DMY. Two naturally occurring mutations establish DMY's critical role in male development. The first heritable mutant--a single insertion in exon 3 and the subsequent truncation of DMY--resulted in all XY female offspring. Similarly, the second XY mutant female showed reduced DMY expression with a high proportion of XY female offspring. During normal development, DMY is expressed only in somatic cells of XY gonads. These findings strongly suggest that the sex-specific DMY is required for testicular development and is a prime candidate for the medaka sex-determining gene.