Testicular teratomas result from anomalies in embryonic germ cell development. In 129 inbred mice, teratoma initiation coincides with germ cell sex-specific differentiation and the mitotic-meiotic switch: XX and XY germ cells repress pluripotency, XX germ cells initiate meiosis, and XY germ cells activate male-specific differentiation and mitotic arrest. Here, we report that expression of Nanos2, a gene that is crucial to male sex specification, is delayed in teratoma-susceptible germ cells. Decreased expression of Nanos2 was found to be due, in part, to the Nanos2 allele present in 129 mice. In teratoma-susceptible germ cells, diminished expression of genes downstream of Nanos2 disrupted processes that were crucial to male germ cell differentiation. Deficiency for Nanos2 increased teratoma incidence in 129 mice and induced developmental abnormalities associated with tumor initiation in teratoma-resistant germ cells. Finally, in the absence of commitment to the male germ cell fate, we discovered that a subpopulation of teratoma-susceptible germ cells transition into embryonal carcinoma (EC) cells with primed pluripotent features. We conclude that delayed male germ cell sex-specification facilitates the transformation of germ cells with naïve pluripotent features into primed pluripotent EC cells.