Gonadal histology confirmed that Scarus ferrugineus is a diandric protogynous fish. The process of protogynous sex reversal was investigated through histological observations on the gonads of females changing sex to male. This process was divided into three stages on the basis of changes in the structure of the germinal and somatic elements. Ovaries of functional females (stages IV-V) were filled with vitellogenic oocytes during the breeding season but contained no trace of spermatogenic tissue. During post-spawning period, the remaining vitellogenic oocytes began to degenerate and accompanied by a drop in plasma levels of estradiol-17β. At the commencement of sex change, previtellogenic oocytes began to degenerate and stromal cell aggregation was observed in the central region of the lamellae. At mid-reversal stage, steroid-producing cells (Leydig cells) developed at the border of the stromal aggregate and spermatogonial cysts appear at the periphery of lamellae. Finally, sex change to secondary males was considered complete, with the beginning of active spermatogenesis and spermiation. Plasma levels of testosterone remained low throughout the sex change, but II-KT increased rapidly parallel to the increased number of Leydig cells while the level of estradiol-17β decreased. The results indicate also that the sex-changed males had higher level of II-KT than primary males, while primary males had higher level of testosterone. Histological examination revealed that testes of primary and secondary males are almost identical in organization of the spermatogenic cysts, association of sertoli cells, and developing germ cells but differ in clustering and development of Leydig cells.