In vertebrates that have been examined to date, the sexual identity of germ cells is determined by the sex of gonadal somatic cells. In the teleost fish medaka, a sex-determination gene on the Y chromosome, DMY/dmrt1bY, is expressed in gonadal somatic cells and regulates the sexual identity of germ cells. Here, we report a novel mechanism by which sex chromosomes cell-autonomously confer sexually different characters upon germ cells prior to gonad formation in a genetically sexdetermined species. We have identified a novel gene, Sdgc (sex chromosome-dependent differential expression in germ cells), whose transcripts are highly enriched in early XY germ cells. Chimeric analysis revealed that sexually different expression of Sdgc is controlled in a germ cell-autonomous manner by the number of Y chromosomes. Unexpectedly, DMY/dmrt1bY was expressed in germ cells prior to gonad formation, but knockdown and overexpression of DMY/dmrt1bY did not affect Sdgc expression. We also found that XX and XY germ cells isolated before the onset of DMY/dmrt1bY expression in gonadal somatic cells behaved differently in vitro and were affected by Sdgc. Sdgc maps close to the sex-determination locus, and recombination around the two loci appears to be repressed. Our results provide important insights into the acquisition and plasticity of sexual differences at the cellular level even prior to the developmental stage of sex determination.