Previous studies have demonstrated that the increase in number of Leydig cells during prepubertal maturation results, in part, from the differentiation of mesenchymal precursors between the second and fourth week of postnatal life. After conversion to immature Leydig cells, they actively synthesize testosterone, but this androgen does not accumulate because high 5 alpha-reductase activity rapidly converts testosterone to 5 alpha-reduced metabolites. The present studies examined whether the conversion of precursor cells to immature Leydig cells in vitro by human chorionic gonadotropin (hCG), as characterized by progressive increases in testosterone formation and 5-ene-3 beta-hydroxysteroid dehydrogenase-isomerase (3 beta-HSD) activity, is associated similarly with an enhanced stimulation of 5 alpha-reductase activity. We also evaluated whether this conversion occurs following blockade of dihydrotestosterone (DHT) formation by the inclusion of a 5 alpha-reductase inhibitor during the entire treatment period. Precursor cells were isolated from immature rats using a multi-step procedure normally used to isolate highly purified Leydig cells from adult or immature rats. These cells localize in a region of lower density on Percoll gradients than Leydig cells. Although the acute (3h) response to hCG with respect to testosterone formation, and basal 3 beta-HSD and 5 alpha-reductase activities on day 1 of culture were much higher in purified Leydig cells than precursor cells from immature rats, the response of each parameter to chronic (6-day) treatment with hCG was much greater in precursor cells. Furthermore, the conversion of precursor cells to immature Leydig cells occurred in the presence of a 5 alpha-reductase inhibitor during the entire treatment period, suggesting that this conversion occurs in the absence of DHT. These results demonstrate for the first time that in addition to increased testosterone biosynthesis and 3 beta-HSD activity, the conversion of precursor cells to immature Leydig cells, in vitro, in response to chronic hCG treatment, involves enhanced 5 alpha-reductase activity.