The process of fetal sexual differentiation, which involves establishment of genetic sex, differentiation of the gonads, and development of phenotypic sex, is summarized. The morphologic changes that occur in utero that lead to development of the male and female gonads, germ cells, reproductive tracts, and external genitalia are described. Most of the article focuses on the hormones that regulate sexual differentiation and development in utero. The genetic factors that regulate sexual differentiation, which constitute a new and emerging field, also are discussed.