In humans and rodents, the prostate gland develops from the embryonic urogenital sinus (UGS). The androgen receptor (AR) is thought to control the expression of morphogenetic genes in inductive UGS mesenchyme, which promotes proliferation and cytodifferentiation of the prostatic epithelium. However, the nature of the AR-regulated morphogenetic genes and the mechanisms whereby AR controls prostate development are not understood. Glial cell line-derived neurotrophic factor (GDNF) binds GDNF family receptor α1 (GFRα1) and signals through activation of RET tyrosine kinase. Gene disruption studies in mice have revealed essential roles for GDNF signaling in development; however, its role in prostate development is unexplored. Here, we establish novel roles of GDNF signaling in mouse prostate development. Using an organ culture system for prostate development and Ret mutant mice, we demonstrate that RET-mediated GDNF signaling in UGS increases proliferation of mesenchyme cells and suppresses androgen-induced proliferation and differentiation of prostate epithelial cells, inhibiting prostate development. We also identify Ar as a GDNF-repressed gene and Gdnf and Gfrα1 as androgen-repressed genes in UGS, thus establishing reciprocal regulatory crosstalk between AR and GDNF signaling in prostate development.