In the twentieth century, the dominant model of sexual differentiation stated that genetic sex (XX versus XY) causes differentiation of the gonads, which then secrete gonadal hormones that act directly on tissues to induce sex differences in function. This serial model of sexual differentiation was simple, unifying and seductive. Recent evidence, however, indicates that the linear model is incorrect and that sex differences arise in response to diverse sex-specific signals originating from inherent differences in the genome and involve cellular mechanisms that are specific to individual tissues or brain regions. Moreover, sex-specific effects of the environment reciprocally affect biology, sometimes profoundly, and must therefore be integrated into a realistic model of sexual differentiation. A more appropriate model is a parallel-interactive model that encompasses the roles of multiple molecular signals and pathways that differentiate males and females, including synergistic and compensatory interactions among pathways and an important role for the environment.