In mammals, Sry expression in the bipotential, undifferentiated gonad directs the support cell precursors to differentiate as Sertoli cells, thus initiating the testis differentiation pathway. In the absence of Sry, or if Sry is expressed at insufficient levels, the support cell precursors differentiate as granulosa cells, thus initiating the ovarian pathway. The molecular mechanisms upstream and downstream of Sry are not well understood. We demonstrate that the transcription factor GATA4 and its co-factor FOG2 are required for gonadal differentiation. Mouse fetuses homozygous for a null allele of Fog2 or homozygous for a targeted mutation in Gata4 (Gata4ki) that abrogates the interaction of GATA4 with FOG co-factors exhibit abnormalities in gonadogenesis. We found that Sry transcript levels were significantly reduced in XY Fog2–/– gonads at E11.5, which is the time when Sry expression normally reaches its peak. In addition, three genes crucial for normal Sertoli cell function (Sox9, Mis and Dhh) and three Leydig cell steroid biosynthetic enzymes (p450scc, 3βHSD and p450c17) were not expressed in XY Fog2–/– and Gataki/ki gonads, whereas Wnt4, a gene required for normal ovarian development, was expressed ectopically. By contrast, Wt1 and Sf1, which are expressed prior to Sry and necessary for gonad development in both sexes, were expressed normally in both types of mutant XY gonads. These results indicate that GATA4 and FOG2 and their physical interaction are required for normal gonadal development.