Testes from adult and prepubertal mice lacking the Desert hedgehog (DHH:) gene were examined in order to describe further the role of Dhh in spermatogenesis because, in a previous report, DHH:-null male mice were shown to be sterile. Dhh is a signaling molecule expressed by Sertoli cells. Its receptor, patched (Ptc), has been previously localized to Leydig cells and is herein described as being localized also to peritubular cells. Two phenotypes of the mice were observed: masculinized (7.5% of DHH:-null males) and feminized (92.5%), both of which displayed abnormal peritubular tissue and severely restricted spermatogenesis. Testes from adult feminized animals lacked adult-type Leydig cells and displayed numerous undifferentiated fibroblastic cells in the interstitium that produced abundant collagen. The basal lamina, normally present between the myoid cells and Sertoli cells, was focally absent. We speculate that the abnormal basal lamina contributed to other characteristics, such as extracordal gonocytes, apolar Sertoli cells, and anastomotic seminiferous tubules. The two DHH:-null phenotypes described have common peritubular cell defects that may be indicative of the essential role of peritubular cells in development of tubular morphology, the differentiation of Leydig cells, and the ultimate support of spermatogenesis.