Normal penile development is dependent on testosterone, its conversion via steroid 5 alpha-reductase type 2 to dihydrotestosterone, and a functional androgen receptor (AR). The goal of this study was to investigate the distribution of AR and 5 alpha-reductase type 2 in the developing human fetal external genitalia with special emphasis on urethra formation. Twenty fetal genital specimens from normal human males (12-20 weeks gestation) were sectioned serially and stained by avidin-biotinylated peroxidase complex method with antigen retrieval. Stained sections throughout male genital development documented the expression of AR and 5 alpha-reductase type 2 in the phallus. Between 12 and 14 weeks of gestation, AR was localized to epithelial cells of the urethral plate in the glans, the tubular urethra of the penile shaft, and stromal tissue surrounding the urethral epithelium. In the fetal penis between 16 and 20 weeks gestation, the density of AR expression was greatest in urethral epithelial cells versus the surrounding stromal tissues. There was a characteristic pattern of AR expression in the glandular urethral epithelium between 16 and 20 weeks gestation. AR expression was greater along the ventral aspect of the glandular urethra than along the dorsal aspect of the urethral epithelium. The expression of 5 alpha-reductase type 2 was localized to the stroma surrounding the urethra, especially along the urethral seam area in the ventral portion of the remodeling urethra. These anatomical studies support the hypothesis that androgens are essential for the formation of the ventral portion of the urethra and that abnormalities in either the AR or 5 alpha-reductase type 2 can explain the occurrence of hypospadias.