Gonadal sex determination represents a unique model for studying cell fate decisions. However, a complete understanding of the different cell lineages forming the developing testis and ovary remains elusive. Here, we investigated the origin, specification, and subsequent sex-specific differentiation of a previously uncharacterized population of supporting-like cells (SLCs) in the developing mouse gonads. The SLC lineage is closely related to the coelomic epithelium and specified as early as E10.5, making it the first somatic lineage to be specified in the bipotential gonad. SLC progenitors are localized within the genital ridge at the interface with the mesonephros and initially coexpress Wnt4 and Sox9. SLCs become sexually dimorphic around E12.5, progressively acquire a more Sertoli- or pregranulosa-like identity and contribute to the formation of the rete testis and rete ovarii. Last, we found that WNT4 is a crucial regulator of the SLC lineage and is required for normal development of the rete testis.