Fetal prostate development from urogenital sinus (UGS) epithelium requires androgen receptor (AR) activation in UGS mesenchyme (UGM). Despite growing awareness of sexually dimorphic gene expression in the UGS, we are still limited in our knowledge of androgen-responsive genes in UGM that initiate prostate ductal development. We found that WNT inhibitory factor 1 (Wif1) mRNA is more abundant in male vs. female mouse UGM in which its expression temporally and spatially overlaps androgen-responsive steroid 5α-reductase 2 (Srd5a2). Wif1 mRNA is also present in prostatic buds during their elongation and branching morphogenesis. Androgens are necessary and sufficient for Wif1 expression in mouse UGS explant mesenchyme, and testicular androgens remain necessary for normal Wif1 expression in adult mouse prostate stroma. WIF1 contributes functionally to prostatic bud formation. In the presence of androgens, exogenous WIF1 protein increases prostatic bud number and UGS basal epithelial cell proliferation without noticeably altering the pattern of WNT/β-catenin-responsive Axin2 or lymphoid enhancer binding factor 1 (Lef1) mRNA. Wif1 mutant male UGSs exhibit increased (Sfrp)2 and (Sfrp)3 expression and form the same number of prostatic buds as the wild-type control males. Collectively our results reveal Wif1 as one of the few known androgen-responsive genes in the fetal mouse UGM and support the hypothesis that androgen-dependent Wif1 expression is linked to the mechanism of androgen-induced prostatic bud formation.