The aromatase activity from purified testicular sources (Leydig and Sertoli cells) of immature (5- and 15-day-old) and adult rats (60-day-old) was investigated by the tritiated water release method in isolated Leydig and Sertoli cells that were morphologically and functionally characterized. Electron micrographs of Sertoli cell preparations from different ages showed no marked changes, except that tight junctions between Sertoli cells normally present in 60-day-old rats were not observed in 5-day-old and rarely found in 15-day-old animals. Leydig cells underwent ultrastructural changes along with development, such as the appearance of thicker nuclear heterochromatin and laminar-like mitochondria. The 15-day-old rat interstitial tissue possessed less than 10% of Leydig cells morphologically similar to those present in the adult, whereas the rest were probably transition cells, since they did not show typical Leydig cell structure but were able to bind [125I]iodo-hCG, as evaluated by autoradiography. The number of LH/hCG-binding sites increased with age in Leydig cells, but was not detectable in Sertoli cells. The highest number of FSH-binding sites in Sertoli cells was observed in the 15-day-old animals. Minor FSH binding was found in Leydig cell preparations, which was consistent with the known LH contamination of the human FSH tracer preparation. cAMP production increased significantly in Leydig cells only after hCG treatment and in Sertoli cells after FSH stimulation. Both types of cells were shown to have the capacity for aromatization. The aromatase activity increased in the Leydig cell but decreased in the Sertoli cell during testicular development. The highest aromatase activity was found in adult rat Leydig cells, and the enzyme activity was significantly higher (2-fold) in purified Leydig cells than in crude interstitial cell preparations. Estradiol production in response to hCG stimulation in vitro was not different from the basal value in 5-day-old rat Leydig cells, but increased significantly in 60-day-old rat Leydig cells. In conclusion, 1) Leydig cells are the major site of estrogen synthesis in adult rat testis; and 2) the low aromatase activity observed in immature rat Leydig cells could partially explain the differential response of the mature and immature rat testis to hCG-induced desensitization.