Recently, we demonstrated that loss of Fgf9 results in a block of testis development and a male to female sex-reversed phenotype; however, the function of Fgf9 in sex determination was unknown. We now show that Fgf9 is necessary for two steps of testis development just downstream of the male sex-determining gene, Sry: (1) for the proliferation of a population of cells that give rise to Sertoli progenitors; and (2) for the nuclear localization of an FGF receptor (FGFR2) in Sertoli cell precursors. The nuclear localization of FGFR2 coincides with the initiation of Sry expression and the nuclear localization of SOX9 during the early differentiation of Sertoli cells and the determination of male fate.