Radiation and chemotherapeutic drugs cause permanent sterility in male rats, not by killing most of the spermatogonial stem cells, but by blocking their differentiation in a testosterone‐dependent manner. However, it is not known whether radiation induces this block by altering the germ or the somatic cells. To address this question, we transplanted populations of rat testicular cells containing stem spermatogonia and expressing the green fluorescent protein (GFP) transgene into various hosts. Transplantation of the stem spermatogonia from irradiated adult rats into the testes of irradiated nude mice, which do not show the differentiation block of their own spermatogonia, permitted differentiation of the rat spermatogonia into spermatozoa. Conversely transplantation of spermatogonial stem cells from untreated prepubertal rats into irradiated rat testes showed that the donor spermatogonia were able to colonize along the basement membrane of the seminiferous tubules but could not differentiate. Finally, suppression of testosterone in the recipient irradiated rats allowed the differentiation of the transplanted spermatogonia. These results conclusively show that the defect caused by radiation in the rat testes that results in the block of spermatogonial differentiation is due to injury to the somatic compartment. We also observed colonization of tubules by transplanted Sertoli cells from immature rats. The present results suggest that transplantation of spermatogonia, harvested from prepubertal testes to adult testes that have been exposed to cytotoxic therapy might be limited by the somatic damage and may require hormonal treatments or transplantation of somatic elements to restore the ability of the tissue to support spermatogenesis. J. Cell. Physiol. 211: 149–158, 2007. © 2006 Wiley‐Liss, Inc.