During mouse development, the gonad begins to form shortly before 10.5 days postcoitum (dpc) on the ventromedial side of the mesonephros. The XY gonad consists of germ cells and somatic cells. The origin of the germ cells is clearly established; however, the origin of the somatic cells, especially the epithelial supporting cell lineages, called Sertoli cells, is still unclear. Sertoli cells are the first somatic cell type to differentiate in the testis and are thought to expressSry,the male sex-determining gene, and to play a crucial role in directing testis development. Previous data have suggested that the somatic cells of the gonad may arise from the mesonephric tubules, the mesonephric mesenchyme, or the coelomic epithelium. Immunohistochemical staining of the gonad at 11.5 dpc showed that the basement membrane barrier under the coelomic epithelium is discontinuous, suggesting that cells in the coelomic epithelium at this stage might move inward. To test this possibility directly, cells of the coelomic epithelium were labeled using the fluorescent lipophilic dye, DiI. We show that when labeled at tail somite 15–17 stages, corresponding to 11.2–11.4 dpc, the coelomic epithelial cells of both sexes migrated into the gonad. In XY gonads, the migrating coelomic epithelial cells became Sertoli cells, as well as interstitial cells. This ability of the coelomic epithelium to give rise to Sertoli cells was developmentally regulated. When labeled at tail somite 18–20 stages, corresponding to 11.5–11.7 dpc, the coelomic epithelial cells no longer became Sertoli cells. Instead, cells that migrated into the gonad stayed outside testis cords, in the interstitium. Migration gradually decreased and ceased by tail somite 30 stage, corresponding to 12.5 dpc, after testis cords had formed and the basement membrane layer underlying the coelomic epithelium had thickened to form the tunica albuginea. In XX gonads, coelomic epithelial cells also migrated into the gonad, but there was no obvious fate restriction during the same developmental period. Taken together, our data show that the coelomic epithelium is a source of Sertoli cells as well as other somatic cells of the gonad in the developing mouse testis.