Human DAX1 duplications cause dosage-sensitive sex reversal (DSS) whereby chromosomally XY individuals can develop as females due to gonadal dysgenesis. However, the mechanism of DSS-adrenal hypoplasia congenita on X, gene 1 (DAX1) action in the fetal testis is unknown. We show that in fetal testes from XY Dax1-overexpressing transgenic mice, the expression of the key testis-promoting gene sex-determining region on Y (SRY)-box-9 (Sox9) is reduced. Moreover, in XY Sox9 heterozygotes, in which testis development is usually normal, Dax1 overexpression results in ovotestes, suggesting a DAX1-SOX9 antagonism. The ovarian portion of the XY ovotestes was characterized by expression of the granulosa cell marker, Forkhead box-L2, with complete loss of the Sertoli cell markers, SOX9 and anti-Müllerian hormone, and the Leydig cell marker CYP17A1. However, the expression of SRY and steroidogenic factor-1 (SF1), two key transcriptional regulators of Sox9, was retained in the ovarian portion of the XY ovotestes. Using reporter mice, Dax1 overexpression reduced activation of TES, the testis enhancer of Sox9, indicating that DAX1 might repress Sox9 expression via TES. In cultured cells, increasing levels of DAX1 antagonized SF1-, SF1/SRY-, and SF1/SOX9-mediated activation of TES, due to reduced binding of SF1 to TES, providing a likely mechanism for DSS.