Leydig cells (LCs), which originate from mesenchymal-like progenitors, are the primary testosterone-producing cells in the testis. However, the roles of postnatal LC progenitors in pubertal development, homeostasis, and injury response remain poorly understood. Here, we demonstrate that neonatal testicular Gli1+ cells give rise to nearly all LCs during pubertal development. Conditional deletion of nuclear receptor subfamily 5, group A, member 1 (Nr5a1) in Gli1+ progenitors significantly impairs testicular development by inhibiting pubertal LC formation. Prepubertal exposure to cyclophosphamide disrupts LC formation, further impairing the development of the reproductive system. During adulthood, testicular Gli1+ cells contribute to the slow turnover of LCs, whereas conditional deletion of Nr5a1 has little impact on testicular homeostasis. Following hemicastration, Gli1+ cells rapidly differentiate into LCs in response to unilateral LC depletion, demonstrating that adult Gli1+ cells act as a functional reserve. These findings highlight the critical role of postnatal Gli1+ cells as progenitors of LCs for testicular pubertal development, adult homeostasis, and regeneration.