Testicular Leydig cells are the primary source of testosterone in males. Adult Leydig cells have been shown to arise from stem cells present in the neonatal testis. Once established, adult Leydig cells turn over only slowly during adult life, but when these cells are eliminated experimentally from the adult testis, new Leydig cells rapidly reappear. As in the neonatal testis, stem cells in the adult testis are presumed to be the source of the new Leydig cells. As yet, the mechanisms involved in regulating the proliferation and differentiation of these stem cells remain unknown. We developed a unique in vitro system of cultured seminiferous tubules to assess the ability of factors from the seminiferous tubules to regulate the proliferation of the tubule-associated stem cells, and their subsequent entry into the Leydig cell lineage. The proliferation of the stem Leydig cells was stimulated by paracrine factors including Desert hedgehog (DHH), basic fibroblast growth factor (FGF2), platelet-derived growth factor (PDGF), and activin. Suppression of proliferation occurred with transforming growth factor ÎČ (TGF-ÎČ). The differentiation of the stem cells was regulated positively by DHH, lithium- induced signaling, and activin, and negatively by TGF-ÎČ, PDGFBB, and FGF2. DHH functioned as a commitment factor, inducing the transition of stem cells to the progenitor stage and thus into the Leydig cell lineage. Additionally, CD90 (Thy1) was found to be a unique stem cell surface marker that was used to obtain purified stem cells by flow cytometry.