P seudophosphatases display extensive sequence similarities to phosphatases but harbor amino acid alterations in their active-site consensus motifs that render them catalytically inactive. A potential role in substrate trapping or docking has been proposed, but the specific requirements for pseudophosphatases during development and differentiation are unknown. We demonstrate here that Sbf1, a pseudophosphatase of the myotubularin family, is expressed at high levels in seminiferous tubules of the testis, specifically in Sertoli’s cells, spermatogonia, and pachytene spermatocytes, but not in postmeiotic round spermatids. Mice that are nullizygous for Sbf1 exhibit male infertility characterized by azoospermia. The onset of the spermatogenic defect occurs in the first wave of spermatogenesis at 17 days after birth during the synchronized progression of pachytene spermatocytes to haploid spermatids. Vacuolation of the Sertoli’s cells is the earliest observed phenotype and is followed by reduced formation of spermatids and eventual depletion of the germ cell compartment in older mice. The nullizygous phenotype in conjunction with high-level expression of Sbf1 in premeiotic germ cells and Sertoli’s cells is consistent with a crucial role for Sbf1 in transition from diploid to haploid spermatocytes. These studies demonstrate an essential role for a pseudophosphatase and implicate signaling pathways regulated by myotubularin family proteins in spermatogenesis and germ cell differentiation.