The predisposition of the testis and ovary to primarily synthesize testosterone and estradiol, respectively, is due to gonadal-specific cell types that differentially express the various hydroxysteroid (17) dehydrogenase (HSD17B) isoforms. In testes, Leydig cells rely on LH stimulation to maintain expression of the type 3 (HSD17B3) isoform, which specifically converts androstenedione to testosterone. In ovaries, thecal-interstitial cells also rely on LH to induce androgen synthesis but lack HSD17B3 and therefore secrete androgens of low biological activity. Therefore, thecal cells may possess a mechanism to repress the Leydig cell phenotype and HSD17B3 expression. Estradiol is known to inhibit experimentally Leydig cell function and proliferation. In the current study, we provide evidence that estradiol prevents the development of functional Leydig-like cells in the murine ovary; and that this action is mediated by estrogen receptor- (ER). ER-null (ERKO) female mice exhibit testis-like levels of Hsd17b3 expression in the ovaries and male-like levels of plasma testosterone. Herein, we demonstrate that a) Hsd17b3 expression in ERKO ovaries is a primary effect of the loss of intraovarian ER actions, b) ERKO ovarian cells produce substantial levels of testosterone in vitro and this is blocked by a HSD17B3 specific inhibitor, c) Hsd17b3 expression in ERKO ovaries is LH regulated and localized to the secondary/thecal interstitial cells, and d) ERKO secondary/thecal interstitial cells possess Leydig-like ultrastructural features. These data indicate that intraovarian ER actions are required to repress Hsd17b3 expression in the ovary and may be important to maintaining a female phenotype in secondary/thecal interstitial cells.