C. elegans occurs in two natural sexes, the XX hermaphrodite and the XO male, which differ extensively in anatomy, physiology, and behavior. All somatic differences between the sexes result from the differential activity of a "global" sex determination regulatory pathway. This pathway also controls X chromosome dosage compensation, which is coordinated with sex determination by the action of the three SDC proteins. The SDC proteins control somatic and germline sex by transcriptional repression of the her-1 gene. HER-1 is a secreted protein that controls a regulatory module consisting of a transmembrane receptor, TRA-2, three intracellular FEM proteins, and the zinc finger transcription factor TRA-1. The molecular workings of this regulatory module are still being elucidated. Similarity of TRA-2 to patched receptors and of TRA-1 to GLI proteins suggests that parts of the global pathway originally derived from a Hedgehog signaling pathway. TRA-1 controls all aspects of somatic sexual differentiation, presumably by regulating a variety of tissue- and cell-specific downstream targets, including the cell death regulator EGL-1 and the male sexual regulator MAB-3. Sex determination evolves rapidly, and conservation of sexual regulators between phyla has been elusive. An apparent exception involves DM domain proteins, including MAB-3, which control sexual differentiation in nematodes, arthropods, and vertebrates. Important issues needing more study include the detailed molecular mechanisms of the global pathway, the identities of additional sexual regulators acting in the global pathway and downstream of TRA-1, and the evolutionary history of the sex determination pathway. Recently developed genetic and genomic technologies and comparative studies in divergent species have begun to address these issues.