Unlike many features of metazoan development, sex determination is not widely conserved among phyla. However, the recent demonstration that one gene family controls sexual development in Drosophila, C. elegans, and vertebrates suggests that sex determination mechanisms may have evolved from a common pathway that has diverged radically since the Cambrian. Sex determination gene sequences often evolve quickly, but it is not known how this relates to higher-order pathways or what selective or neutral forces are driving it. In such a rapidly evolving developmental pathway, the fate of functionally linked genes is of particular interest. To investigate a pair of such genes, we cloned orthologs of the key C. elegans male-promoting gene fem-3 from two sister species, C. briggsae and C. remanei. We employed RNA interference to show that in all three species, the male-promoting function of fem-3 and its epistatic relationship with its female-promoting upstream repressor, tra-2, are conserved. Consistent with this, the FEM-3 protein interacts with TRA-2 in each species, but in a strictly species-specific manner. Because FEM-3 is the most divergent protein yet described in Caenorhabditis and the FEM-3 binding domain of TRA-2 is itself hypervariable, a key protein-protein interaction is rapidly evolving in concert. Extrapolation of this result to larger phylogenetic scales helps explain the dissimilarity of the sex determination systems across phyla.