Molecular and cellular mechanisms involved in artificially induced ovarian differentiation were analyzed by exposing embryos of medaka (Oryzias latipes) to a potent nonsteroidal estrogen, diethylstilbestrol (DES). Embryos were exposed for short-exposure (SE) [from 0 to 8 d postfertilization (dpf)] and long-exposure (LE) periods (from 0 to 18/28 dpf) to 1 ng/ml of DES, and status of sexual differentiation in somatic and germ cells of these gonads was analyzed at 8, 18, and 28 dpf by histology, cell proliferation assays, TUNEL assay, and in situ hybridization using sex-specific somatic and germ cell markers. Additionally, gonads of exposed fry were examined after withdrawal of DES to see whether effects of DES in exposed fish were reversible or not. DES induced germ cell proliferation and meiosis in XY fry of SE and LE groups. However, SE induced only a partial reduction in expression of gonadal soma-derived factor, the male-dominant somatic cell marker, and was not sufficient to induce ovarian development after withdrawal of DES. On the contrary, LE resulted in complete loss of such male-specific gene expression in somatic cells of XY gonads, and these gonads underwent sustained ovarian development even after withdrawal of DES. Importantly, LE to DES affected germ cell proliferation in XX gonads adversely during early stages of sexual differentiation, leading to reduced gonad weight in adulthood. Interestingly, apoptosis was not the cause for reduction in germ cell number. Taken together, these results indicated that DES exposure has long-lasting effects on the gonadal development in genetic males (sex reversal) and females (reduced gonad weight) of medaka.