Eggs of a sex-linked cross were injected on the fourth day of incubation with 100 μg of estradiol benzoate. Both injected and control chicks were sacrificed at varying intervals after hatching and a histochemical study of their gonads was conducted. Medullary cells, rich in lipids and with a high 3β-hydroxysteroid activity, were present in newly hatched inverted embryos with a localization similar to that found in normal female gonads. These characterstics persisted in the inverted gonad throughout the whole period of sex reversion. As these cells are supposed to secrete estrogens, it is suggested that the regression of cortex in inverted gonads is not due to lack of estrogen stimulation. Rapid proliferation and differentiation of testicular tissue in the medullary region takes place after the cortex has started its involution and appears to be a consequence of this process, rather than a cause.