Testicular descent in mice is dependent upon proper outgrowth of the gubernaculum primordia under the influence of the insulin-like 3 gene product (Insl3). Deletion of this gene prevents gubernaculum growth and causes bilateral cryptorchidism. In vitro experiments have led to the suggestion that Insl3 and androgens together induce outgrowth of the gubernacular primordia. The experiments reported here were designed specifically to determine whether in vivo the Insl3-mediated gubernaculum development is independent of androgens. To that effect transgenic male and female mice were generated that overexpressed Insl3 in the pancreas during fetal and postnatal life. Expression of the transgenic allele in the Insl3-deficient mice rescued the cryptorchidism in male mutant, indicating that the islet beta-cells efficiently processed the Insl3 gene product to the functional hormone. All transgenic females displayed bilateral inguinal hernia. The processus vaginalis developed containing intestinal loops. The Müllerian derivatives gave rise to oviduct, uterus, and upper vagina, and Wolffian duct derivatives were missing, indicating the absence of the androgen- and anti-Müllerian hormone-mediated activities in transgenic females. The ovaries descended into a position over the bladder and attached to the abdominal wall via the well developed cranial suspensory ligament and the gubernaculum. Administration of dihydrotestosterone during prenatal development suppressed formation of the cranial suspensory ligament and thereby allowed the descent of the ovaries into the processus vaginalis. These results suggest that Insl3-mediated activity induces gubernaculum development and precludes a role of androgen in this process. Furthermore, the transgenic females exhibit reduced fertility, which is due to fetal mortality during midgestation.