Sertoli cell produces several biological factors that modulate Leydig cell steroidogenic function by either stimulating or inhibiting its testosterone production. We have evaluated the effect of an inhibitory factor in the spent media of a Sertoli clonal cell line (TM4) which inhibits Leydig cell steroidogenesis. The presence of such an inhibitory factor in TM4 media was bioassayed using Percoll purified Leydig cells isolated from adult rats with purity of greater than 95%. TM4 media inhibited both human chorionic gonadotropin (hCG)-stimulated testosterone and cAMP production by purified Leydig cells dose-dependently but had no apparent effect on 8-bromo-cAMP- and forskolin-stimulated testosterone production. Also it did not interfere with the binding of [125I]hCG to Leydig cells. TM4 media inhibited cholera toxin-stimulated testosterone production as well as forskolin- and cholera toxin-stimulated cAMP production. The mechanism of action of this factor in TM4 media appears to be different from transforming growth factor (TGF-beta) which inhibited both 8-bromo-cAMP- and forskolin-stimulated testosterone production and inhibited the binding of [125I]hCG binding to Leydig cells. The inhibitory factor contained in TM4 media has been partially purified by sequential preparative anion exchange and C-18 reversed-phase high-performance liquid chromatography. In summary, the Sertoli TM4 cell line produces at least one potent inhibitory factor which decreases the responsiveness of purified Leydig cells to hCG stimulation with a dramatically different mechanism from other currently known Leydig cell inhibitory factors; this protein may serve as a valuable tool to study testicular paracrine regulation.