Gonadal soma-derived factor (Gsdf) is critical for testicular differentiation and early germ cell development in teleosts. The spotted scat (Scatophagus argus), with a stable XX-XY sex-determination system and the candidate sex determination gene dmrt1, provides a good model for understanding the mechanism of sex determination and differentiation in teleosts. In this study, we analyzed spotted scat gsdf tissue distribution and gene expression patterns in gonads, as well as further analysis of transcriptional regulation. Tissue distribution analysis showed that gsdf was only expressed in testis and ovary. Real-time PCR showed that both gsdf and dmrt1 were expressed significantly higher in testes at different phases (phase III, IV and V) compared to ovaries at phase II, III and IV, while gsdf was expressed significantly higher in phase II ovaries than those of phase III and IV. Western blot analysis also showed that Gsdf was more highly expressed in the testis than ovary. Immunohistochemistry analysis showed that Gsdf was expressed in Sertoli cells surrounding spermatogonia in the testis, while it was expressed in the somatic cells surrounding the oogonia of the ovary. Approximately 2.7 kb of the 5' upstream region of gsdf was cloned from the spotted scat genomic DNA and in silico promoter analysis revealed the putative transcription factor binding sites of Dmrt1 and Sf1. The luciferase reporter assay, using the human embryonic kidney cells, demonstrated that Dmrt1 activated gsdf expression in a dose-dependent manner in the presence of Sf1 in spotted scat. These results suggest that Gsdf could play a role in regulating the development of spermatogonia and oogonia, and also participate in male sex differentiation by acting as a downstream gene of Dmrt1 in spotted scat.