Cytological analysis of the mouse Y* chromosome revealed a complex rearrangement involving acquisition of a functional centromere and centromeric heterochromatin and attachment of this chromosomal segment to the distal end of a normal Y* chromosome. This rearrangement positioned the Y* short-arm region at the distal end of the Y* chromosome and the pseudoautosomal region interstitially, just distal to the newly acquired centromere. In addition, the majority of the pseudoautosomal region was inverted. Recombination between the X and the Y* chromosomes generates two new sex chromosomes: (1) a large chromosome comprised of the X chromosome attached at its distal end to all of the Y* chromosome but missing the centromeric region (XY*) and (2) a small chromosome containing the centromeric portion of the Y* chromosome attached to G-band-negative material from the X chromosome (YX). Mice that inherit the XY* chromosome develop as sterile males, whereas mice that inherit the Y*X chromosome develop as fertile females. Recovery of equal numbers of recombinant and nonrecombinant offspring from XY* males supports the hypothesis that recombination between the mammalian X and Y chromosomes is necessary for primary spermatocytes to successfully complete spermatogenesis and form functional sperm.