Müllerian-inhibiting substance (MIS) is a member of the transforming growth factor-beta (TGF-beta) gene family. MIS expression in males causes the regression of the Müllerian ducts, an essential process in male sexual differentiation. Recently, an MIS type II receptor gene has been isolated that is expressed during embryogenesis in mesenchymal cells adjacent to the Müllerian duct epithelium and in Sertoli and granulosa cells of the fetal and adult, male and female gonads, respectively. MIS receptor mutant males develop as internal pseudohermaphrodites, possessing a complete male reproductive tract and also a uterus and oviducts, a phenocopy of MIS ligand-deficient male mice. They express both MIS mRNA and protein, showing that ligand was present, but target organs were hormone-insensitive. All produce sperm, but the majority were infertile because the presence of their female reproductive organs blocks sperm transfer into females. Focal seminiferous tubule atrophy accompanied by Leydig cell hyperplasia was observed and began as early as 2 months of age. The phenotype of MIS ligand/MIS receptor double mutant males was indistinguishable from those of each single mutant. MIS receptor/alpha-inhibin double mutant males developed testicular stromal tumors and large fluid-filled uteri that were identical in phenotype to MIS ligand/alpha-inhibin double mutant males. These studies provide in vivo evidence that MIS is the only ligand of the MIS type II receptor, in contrast to the complexity of other TGF-beta gene family signaling pathways.