The Y chromosome gene Sry encodes a transcription factor required to initiate testis development. The related autosomal gene Sox9 is up-regulated shortly after the onset of Sry transcription and is thought essential for the differentiation of Sertoli cells. The lineage that gives rise to Sertoli cells has its origins within the coelomic epithelium (CE) of the genital ridge, but from cells also able to give rise to an interstitial cell type. It was not known at what point SRY acts in the derivation of this lineage or how the two genes interact. To investigate the identity of the cells expressing Sry, we designed two transgenes driven by the Sry promoter: one gives expression of a stable reporter, human placental alkaline phosphatase (hPLAP), while the second gives expression of a functional Myc-epitope tagged SRY protein (SRY^MYC). Taking advantage of lasting hPLAP activity after transcription of the reporter gene has ceased, we could show that Sry^hPLAP was expressed exclusively in all cells fated to become Sertoli cells. SRY^MYC-single-positive cells were first observed in the gonad and not in the CE. Subsequently, they became SRY^MYC/SOX9-double-positive, but only for a few hours before turning into SOX9-single-positive cells. After the coelomic epithelial cells migrate into the gonad, there is first a decision to become interstitial or supporting cells, and then the transient expression of SRY in the latter determines their fate as Sertoli cells by up-regulating Sox9.