Testes of 29-35-day-old rats were separated into seminiferous tubules and interstitial tissue by collagenase treatment and examined by incubation studies with radioactive substrates. The activity of testosterone 5alpha-reductase/g protein in the interstitial tissue was 37 times greater than that in the tubules. The site of formation of 5alpha-reduced C21- and C19-steroids from progesterone was found to be primarily in the interstitial tissue. In the interstitial tissue, testosterone 5alpha-reductase activity, which was stimulated 300-fold by the addition of NADPH, was localized in the microsomal fraction (8,000-105,000 X g precipitate). NADPH was five times as effective a hydrogen donor as NADH when the washed microsomal fraction was the source of the enzyme. The formation of 5alpha-reduced C21- and C19-steroids from pregnenolone and progesterone was demonstrated in the microsomal fraction of interstitial tissue. These results indicate that in 29-35-day-old rat testes, 5alpha-reduction of C19-delta4-3-ketosteroids and the formation of 5alpha-reduced C21- and C19-steroids from pregnenolone take place largely in the microsomes of interstitial tissue.