Sry is the only gene on the Y chromosome that is required for testis formation in mammals. One of the earliest morphological changes that occurs as a result of Sry expression is a size increase of the rudimentary XY gonad relative to the XX gonad. Using 5'-bromo-2'-deoxyuridine (BrdU) incorporation to label dividing cells, we found that the size increase corresponds with a dramatic increase in somatic cell proliferation in XY gonads, which is not detected in XX gonads. This male-specific proliferation was observed initially in the cells of the coelomic epithelium and occurred in two distinct stages. During the first stage, proliferation in the XY gonad was observed largely in SF1-positive cells and contributed to the Sertoli cell population. During the second stage, proliferation was observed in SF1-negative cells at and below the coelomic epithelium and did not give rise to Sertoli cells. Both stages of proliferation were dependent on Sry and independent of any other genetic differences between male and female gonads, such as X chromosome dosage or other genes on the Y chromosome. The increase in cell proliferation began less than 24 hours after the onset of Sry expression, before the establishment of male-specific gene expression patterns, and before the appearance of any other known male-specific morphological changes in the XY gonad. Therefore, an increase in cell proliferation in the male coelomic epithelium is the earliest identified effect of Sry expression.