Mice lacking the function of the polycomb group protein CBX2 (chromobox homolog 2; also known as M33) show defects in gonadal, adrenal, and splenic development. In particular, XY knockout (KO) mice develop ovaries but not testes, and the gonads are hypoplastic in both sexes. However, how CBX2 regulates development of these tissues remains largely unknown. In the present study, we used microarray, RT-PCR, and immunohistochemical analyses to show that the expression of Sry, Sox9, Lhx9, Ad4BP/SF-1, Dax-1, Gata4, Arx, and Dmrt1, genes encoding transcription factors essential for gonadal development, is affected in Cbx2 KO gonads. Male-to-female sex reversal in Cbx2 KO mice was rescued by crossing them with transgenic mice displaying forced expression of Sry or Sox9. However, testes remained hypoplastic in these mice, indicating that the size and the sex of the gonad are determined by different sets of genes. Our study implicates Cbx2 in testis differentiation through regulating Sry gene expression.