The pathway of mammalian sex determination, and subsequent differentiation of the gonads is under the control of the sex-determining gene, Sry, on the Y chromosome. The presence of Sry leads to the formation of a testis with its complement of Sertoli and Leydig somatic cells. In the absence of Sry, an ovary develops with granulosa and theca cells. Ovarian development is said to initiate in the XX gonad as a default pathway because the XX cells do not express Sry. This review summarizes evidence supporting the view that the ovary is not entirely a default gonad. Studies of mice with deletions in both estrogen receptor (ERalphabetaKO) or aromatase (ArKO) genes have identified an important role of estrogens in maintaining differentiation and development of somatic cells in the ovary of eutherian mammals. In the absence of estrogen (ArKO) or the capacity to transduce an estrogen signal (ERalphabetaKO), the somatic cells in the ovary exhibited a male phenotype including Sertoli and Leydig cells. When ArKO mice were replaced with estrogen, the male phenotype was diminished and there was evidence of normal folliculogenesis in the ovary. It is concluded that the differentiation of somatic cells in the eutherian ovary is influenced by the sex steroid environment.