DMRT1, which is found in many vertebrates, exhibits testis-specific expression during the sexual differentiation period, suggesting a conserved function of DMRT1 in the testicular development of vertebrate gonads. However, functional analyses have been reported only in mammals. The current study focused on the Dmrt1 function in the teleost medaka, Oryzias latipes, which has an XX-XY sex determination system. Although medaka sex is determined by the presence or absence of the Y chromosome-specific gene Dmy, we demonstrated that in one Dmrt1 mutant line, which was found by screening a gene-driven mutagenesis library, XY mutants developed into normal females and laid eggs. Histological analyses of this mutant revealed that the XY mutant gonads first developed into the normal testis type. However, the gonads transdifferentiated into the ovary type. The mutant phenotype could be rescued by transgenesis of the Dmrt1 genomic region. These results show that Dmrt1 is essential to maintain testis differentiation after Dmy-triggered male differentiation pathway.