A sexually dimorphic nucleus that can be identified in adult sheep by its characteristic pattern of cytochrome P450 aromatase mRNA exists in the preoptic/anterior hypothalamic area and is called the ovine sexually dimorphic nucleus (oSDN). In other species, male-typical sexually dimorphic preoptic nuclei develop under the influence of gonadal testosterone exposure. Thus, we hypothesized that the oSDN develops before birth in the sheep and is organized by exposure to testosterone. To test this, we determined whether an identifiable oSDN is present in the fetal lamb brain at d 130-140 gestation (term approximately 150 d). In situ hybridization for aromatase mRNA revealed a cell group in the caudal preoptic area that corresponded to the oSDN in adults. Quantitative analysis showed that the mean volume of the oSDN in late-gestation fetuses was significantly larger in male than in female lamb fetuses. We next treated a group of pregnant ewes with testosterone propionate (TP) from d 30-90 gestation and measured oSDN volumes in TP-exposed and control fetuses on d 135 gestation. The mean volume of the oSDN in female fetuses exposed to TP was significantly larger than in control females and also larger than in control and TP-exposed males. Taken together, these data demonstrate that testosterone acts during a prenatal critical period to organize the development of aromatase-expressing neurons into the male-typical oSDN in sheep.