Some teleost fishes change their sex, and some of these fishes have specific gonads known as “ovotestes”, i.e., gonads containing both ovarian and testicular tissues. In this study, we revealed the gonadal transformation process and cell dynamics during the female‐to‐male sex change in the harlequin sandsmelt, Parapercis pulchella (Pinguipetidae), in which females possess ovotestes. Histological observations revealed that, although female ovotestes were composed of oocytes, a few cysts of male germ cells were observed among them. At the initial phase of sex change, male germ cells increased, and spermatogenesis proceeded. After that, oocytes decreased and finally disappeared, and the gonads became functional testes. Immunohistochemistry using antibodies against Pcna (proliferating cell nuclear antigen) as a cell proliferation marker revealed that spermatogonia were Pcna positive, whereas spermatocytes were negative, in female ovotestes. This suggests that spermatogenesis is arrested at the spermatocyte stage. In addition, some somatic cells surrounding oocytes, which were thought to be the female follicle cells, were Pcna positive during sex change, indicating that these cells proliferate during sex change and are reused in male testes after sex change. Also, immunostaining using antibodies against active cleaved‐Caspase3a as an apoptosis marker demonstrated that oocytes degenerated through apoptotic cell death at the late transition stage. Together with previous findings in other fishes, these findings suggested that the histological processes in gonads during sex change, such as the order of developmental events, developmental fates of ovarian cavities, and ovotestis structures, are diversified among fish species. In contrast, cellular dynamics of female germ and somatic cells during sex change are common among protogynous species.This article is protected by copyright. All rights reserved.