Müllerian inhibiting substance (MIS), also known as anti-Müllerian hormone, is a glycoprotein normally secreted by the Sertoli cells of the fetal and adult testis and by granulosa cells of the postnatal ovary. The production of MIS in the male fetus brings about the regression of the Müllerian ducts, the anlagen of the uterus, oviducts, and upper vagina. In addition, purified MIS induces the formation of seminiferous cord-like structures in fetal rat ovaries cultured in vitro, suggesting that MIS may influence testicular differentiation. We have produced transgenic mice chronically expressing human MIS under the control of the mouse metallothionein-1 promoter to investigate its role during sexual development. In females, chronic expression led to the inhibition of Müllerian duct differentiation, resulting in a blind vagina and no uterus or oviducts. At birth the ovaries had fewer germ cells than normal; during the next two weeks germ cells were lost and the somatic cells became organized into structures resembling seminiferous tubules. Apparently, these structures degenerate as they are undetectable in adult females. The majority of transgenic males developed normally. But in two lines with the highest levels of MIS expression, some males showed feminization of the external genitalia, impairment of Wolffian duct development, and undescended testes. These results suggest that MIS has several distinct roles in mammalian sexual development.