Previous work in our laboratory showed that pre-Sertoli cells adopt an epithelial phenotype when cultured in the presence of reconstituted basement membrane (RBM), and so cultures were established with and without this substrate. Biological activity of isolated developing mouse Sertoli cells maintained in vitro was assessed in the current study by utilising a co-culture approach, to determine whether the cells were capable of affecting ovarian differentiation. Developing Sertoli cells isolated at embryonic day (E) 12.5 exerted a deleterious effect on E12.5 ovaries in co-culture, inducing a loss of germ cells. However, when cells were isolated a day later and co-cultured with E13.5 ovaries (after entry to meiosis has begun), germ cells survived and showed evidence of meiosis, although ovigerous cords in co-cultures were masculinised compared to those of control cultured ovaries. Thus, both stages examined showed biological effects; cultured pre-Sertoli cells explanted at E12.5 showed a negative effect on female germ cells, whereas those explanted at E13.5 masculinised ovigerous cords. The functional status of isolated developing mouse Sertoli cells in vitro was further assessed by immunocytochemistry to investigate the expression of anti-Müllerian hormone, an early product of pre-Sertoli cells. Positive immunostaining was seen in developing Sertoli cells in vitro, particularly where cells had been explanted to an RBM substrate, demonstrating that good epithelial morphology is associated with improved function. Our culture system is therefore well suited for investigating factors produced by developing Sertoli cells, their role in influencing testicular morphogenesis and their potential to perturb ovarian differentiation. We believe that this in vitro approach provides a more physiological assessment compared with the knockout mouse model, where global effects of genes with housekeeping functions can compromise overall development.