Mullerian inhibiting substance (MIS), a glycoprotein from the fetal testis causing regression of the embryonic Mullerian duct, can be inhibited in vitro in the presence of Mn2+ by a wide range of nucleotides including GTP, NAD, ATP, AMP, and several nonhydrolyzable synthetic ATP analogs. Extracellular nucleotide pyrophosphatase (NPPase), an enzyme able to hydrolyze the wide variety of the nucleotides and analogs found to inhibit Mullerian duct regression, was studied by histochemical staining (H. Sierakowska and D. Shugar (1963). Biochem. Biophys. Res. Commun. 11, 70-74) to determine if NPPase localized in or around the Mullerian duct during regression. Frozen sections of urogenital ridges from 14 1/2- to 17 1/2-day rat fetuses (n = 77) were incubated with a-naphthyl thymidine-5'-phosphate (naphthyl TMP) and Fast Red TR. Nucleotide pyrophosphatase hydrolyzes naphthyl TMP, releasing naphthol, which then reacts with Fast Red to produce color at the enzyme site. Nucleotide hydrolysis was detected around regressing male (n = 16) Mullerian duct cells at 16 1/2 days of gestation, but no hydrolysis was detected around female (n = 17) Mullerian duct cells at any stage. Controls (n = 24) incubated without substrate did not stain. Addition of exogenous ATP (n = 20) to the histochemical incubation medium inhibited nucleotide hydrolysis on male Mullerian ducts, suggesting that this staining is specific for pyrophosphatase activity. Results in vivo were confirmed in vitro by incubating 14 1/2 day female rat urogenital ridges with MIS for 72 hr prior to histochemical staining. The addition of testosterone to MIS was obligatory to detect staining in vitro (n = 10). The localized NPPase activity around the regressing Mullerian duct suggests that NPPase may appear as a consequence of duct regression and may act to control the degree of membrane phosphorylation by degrading excess trinucleotides.