In hypophysectomized rats, 2 days after the administration of the cytotoxic drug ethane dimethyl sulphonate (EDS), the proliferative activity of Leydig cell precursors increased six-fold. Thus, factors other than LH act locally to stimulate the proliferation of precursor cells after EDS. Twenty-six days after EDS administration, neither cells with the morphological characteristics of Leydig cells nor histochemical enzyme activities, such as 3 beta-HSD and alpha-naphtyl esterase, could be detected in testis tissue. In hypophysectomized rats treated daily with hCG (100 iu) for 7 days, starting at 26 days after EDS, the number of Leydig cells was increased to 48 +/- 11 cells (per 1000 Sertoli cells), which is approximately 4.5% of the intact control level. 3 beta-HSD and alpha-naphtyl esterase activity could be detected, and plasma testosterone levels had increased 15-fold compared with the hypophysectomized controls. These results show that proliferation and some differentiation of precursor cells along the Leydig cell lineage can occur independent of LH, but the final stages of the differentiation process require hCG stimulation.