Although it appears that the perinatal development of sexual phenotype in the rodent brain is determined by exposure to estradiol, generated locally via aromatization of androgen, the mechanisms underlying this process are not fully understood. We have, therefore, developed an in vitro model of hormone action based upon examining the effects of sex steroids on SV-40-transformed fetal rat hypothalamic cell lines. Using serum-free growth factor-deficient conditions the effects of 17α-and 17β-estradiol, testosterone, dihydrotestosterone (DHT), and tamoxifen on survival of two estrogen-binding rat hypothalamic cell lines were examined. In one cell line, RCF-8, both 17β-estradiol and testosterone increased survival at picomolar concentrations. This effect was blocked by tamoxifen, but could not be reproduced by the nonaromatizable androgen DHT or the inactive isomer 17α-estradiol. In the other cell line, RCA-6, addition of 17β-estradiol led to inhibition of cellular proliferation, which was reversed by the addition of tamoxifen. In an estrogen receptor-negative hypothalamic cell line, RCF-12, estradiol had no net effect on the growth pattern. In summary, the estrogen-binding capacity and the responsiveness to physiological concentrations of estradiol and testosterone, but not DHT, make the RCF-8 cell line a potential in vitro model of hypothalamic sexual differentiation. The use of estrogen-sensitive hypothalamic cell lines provides a unique opportunity for studying the cellular mechanisms underlying this process. (Endocrinology126: 235–240, 1990)