Vertebrate gonads comprise three primary cell types, germ cells, steroidogenic cells, and supporting cells. The latter are the first cell type to differentiate in the embryonic gonad and direct the formation of other somatic lineages. During gonadal sex determination, the supporting cell lineage differentiates into Sertoli cells in males and pre-granulosa cells in females. In the chicken embryo, the molecular trigger for Sertoli cell differentiation is the Z-linked gene DMRT1. Recently, single cell RNA-seq data indicate that that chicken steroidogenic cells, derive from differentiated supporting cells. This differentiation process is achieved by a sequential upregulation of steroidogenic genes and down-regulation of supporting cell markers. The exact mechanism regulating this differentiation process remains unknown. We identified the gene TOX3 as a novel transcription factor expressed in embryonic Sertoli cells of the chicken testis. TOX3 knockdown in males resulted in increased CYP17A1 positive Leydig cells. TOX3 over-expression in male and female gonads resulted in a significant decline in CYP17A1 positive steroidogenic cells. TOX3 expression is negatively regulated by estrogens in vivo, but not induced during masculinization induced by estrogen inhibition. In ovo knock-down of the testis determinant, DMRT1, in male gonads resulted in a down-regulation of TOX3 expression. Conversely, DMRT1 over-expression caused an increase in TOX3 expression. Taken together, this data indicates that DMRT1 regulation of TOX3 modulates expansion of the steroidogenic lineage, either directly, via cell lineage allocation, or indirectly via signaling from the supporting to steroidogenic cell populations.