During embryogenesis, primordial germ cells (PGCs) have the potential to enter either spermatogenesis or oogenesis. In a female genital ridge, or in a non-gonadal environment, PGCs develop as meiotic oocytes. However, male gonadal somatic cells inhibit PGCs from entering meiosis and direct them to a spermatogenic fate. We have examined the ability of PGCs from male and female embryos to respond to the masculinising environment of the male genital ridge, defining a temporal window during which PGCs retain a bipotential fate. To help understand how PGCs respond to the male gonadal environment, we have identified molecular differences between male PGCs that are committed to spermatogenesis and bipotential female PGCs. Our results suggest that one way in which PGCs respond to this masculinising environment is to synthesise prostaglandin D(2). We show that this signalling molecule can partially masculinise female embryonic gonads in culture, probably by inducing female supporting cells to differentiate into Sertoli cells. In the developing testis, prostaglandin D(2) may act as a paracrine factor to induce Sertoli cell differentiation. Thus part of the response of PGCs to the male gonadal environment is to generate a masculinising feedback loop to ensure male differentiation of the surrounding gonadal somatic cells.