Impaired testicular descent (cryptorchidism) is one of the most frequent congenital abnormalities in humans, involving 2% of male births. Cryptorchidism can result in infertility and increases risk for development of germ-cell tumours. Testicular descent from abdomen to scrotum occurs in two distinct phases: the trans-abdominal phase and the inguino-scrotal phase. Currently, little is known about the factors that regulate the trans-abdominal phase of testicular descent. Leydig insulin-like hormone (Insl3) is a member of the insulin hormone superfamily expressed in the developing testis. We show here that mice mutant for Insl3 are viable, but exhibit bilateral cryptorchidism due to developmental abnormalities of the gubernaculum, resulting in abnormal spermatogenesis and infertility. Female homozygotes have impaired fertility associated with deregulation of the oestrus cycle. These findings reveal roles for Insl3 in the development of the urogenital tract and in female fertility. Insl3 may act as a hormone to regulate the growth and differentiation of the gubernaculum, thereby mediating intra-abdominal testicular descent.