Insulin-like factor 3 (INSL3) is essential for fetal testis descent, and has been implicated in the testicular and sperm functions in adult males; however, similar functions in domestic ruminants remain largely unknown. This study investigated the functional INSL3 hormone-receptor system in adult ruminant testes and spermatozoa, and explored its potential to diagnose the fertility of sires. Testes and spermatozoa were obtained from fertile bulls, rams and he-goats, whereas subfertile testes and spermatozoa were obtained only from bulls. As expected, INSL3 was visualized in Leydig cells, while we clearly demonstrated that the functional receptor, relaxin family peptide receptor 2 (RXFP2), enabling INSL3 to bind was identified in testicular germ cells and in the sperm equatorial segment of bulls, rams and he-goats. In comparison to fertile bulls, the percentage of INSL3- and RXFP2-expressing cells and their expression levels per cell were significantly reduced in the testes of subfertile bulls. In addition, the population of INSL3-binding spermatozoa was also significantly reduced in the semen of subfertile bulls. These results provide evidence for a functional INSL3 hormone-receptor system operating in ruminant testes and spermatozoa, and its potential to predict subfertility in sires.