The development of gonadotropin receptors for LH and hCG in the fetal rabbit testis from 17-29 days of gestation was followed by quantitative binding studies with [125I]iodohCG and compared with gonadal testosterone content and the histological differentiation of the fetal Leydig cells. The concentrations of gonadotropin receptors and testosterone in the fetal testis were low on days 17 and 18 and increased strikingly on day 19. This time sequence for development of LH-hCG receptors and steroid content of the testis was correlated exactly with the histological appearance of the endoplasmic reticulum characteristic of the differentiated Leydig cell. When fetal testes were examined at 12-h intervals between days 17 and 19, gonadotropin binding and testosterone content were closely correlated at all times studied. Thus, no dissociation between the two functions was demonstrable in the testis at any time during gestation. In the fetal ovary, LH-hCG binding and testosterone content were low or undetectable at all stages of gestation. These observations demonstrate a close temporal relationship between the appearance of the LH-hCG receptor and the synthesis of testosterone by the fetal testis and demonstrate that the histological and functional differentiation of the Leydig cell occurs within a few hours at approximately day 18 of gestation. The simultaneous appearance of LH-hCG receptors and testosterone synthesis in the gonad can be regarded as the biochemical manifestations of Leydig cell differentiation in the testis of the fetal rabbit.