The influence of somatic cells affecting the differentiation and development of germ cells in gonadal differentiation is discussed. It has been confirmed that both the male and the female germ cells can be induced to enter meiosis under the influence of the rete ovarii. The interaction between germinal and somatic cells is also investigated using an artificial chimaeric gonad which contains somatic and germinal cells of opposite sexes. The results indicate that XY germ cells can survive in the XX somatic environment and are induced to enter meiosis precociously while XX germ cells fail to survive in an XY somatic environment.