A Y-linked gene, DMY/dmrt1bY, in teleost fish medka and a Z-linked gene, DMRT1, in chicken are both required for male sex determination. We recently isolated a W-linked gene, DM-W, as a paralogue of DMRT1 in Xenopus laevis, which has a ZZ/ZW-type sex-determining system. The DNA-binding domain of DM-W shows high sequence identity with that of DMRT1, but DM-W has no significant sequence similarity with the transactivation domain of DMRT1. Here, we first show colocalization of DM-W and DMRT1 in the somatic cells surrounding primordial germ cells in ZW gonad during sex determination. We next examined characteristics of DM-W and DMRT1 as a transcription factor in vitro. DM-W and DMRT1 shared a DNA-binding sequence. Importantly, DM-W dose-dependently antagonized the transcriptional activity of DMRT1 on a DMRT1-driven luciferase reporter system in 293 cells. We also examined roles of DM-W or DMRT1 in gonadal formation. Some transgenic ZW tadpoles bearing a DM-W knockdown vector had gonads with a testicular structure, and two developed into frogs with testicular gonads. Ectopic DMRT1 induced primary testicular development in some ZW individuals. These observations indicated that DM-W and DMRT1 could have opposite functions in the sex determination. Our findings support a novel model for a ZZ/ZW-type system in which DM-W directs female sex as a sex-determining gene, by antagonizing DMRT1. Additionally, they suggest that DM-W diverged from DMRT1 as a dominant-negative type gene, i.e. as a ;neofunctionalization' gene for the ZZ/ZW-type system. Finally, we discuss a conserved role of DMRT1 in testis formation during vertebrate evolution.