Mammalian spermatogenesis is maintained by a continuous supply of differentiating cells from self-renewing stem cells. The stem cell activity resides in a small subset of primitive germ cells, the undifferentiated spermatogonia. However, the relationship between the establishment of this population and the initiation of differentiation in the developing testes remains unclear. In this study, we have investigated this issue by using the unique expression of Ngn3, which is expressed specifically in the undifferentiated spermatogonia, but not in the differentiating spermatogonia or their progenitors, the gonocytes. Our lineage analyses demonstrate that the first round of mouse spermatogenesis initiates directly from gonocytes, without passing through the Ngn3-expressing stage (Ngn3- lineage). By contrast, the subsequent rounds of spermatogenesis are derived from Ngn3-positive undifferentiated spermatogonia, which are also immediate descendents of the gonocytes and represent the stem cell function (Ngn3+ lineage). Thus, in mouse spermatogenesis, the state of the undifferentiated spermatogonia is not an inevitable step but is a developmental option that ensures continuous sperm production. In addition, the segregation of gonocytes into undifferentiated spermatogonia (Ngn3+ lineage) or differentiating spermatogonia (Ngn3- lineage) is topographically related to the establishment of the seminiferous epithelial cycle, thus suggesting a role of somatic components in the establishment of stem cells.