In mouse gonadal differentiation, the center‐to‐pole Sry expression pattern suggests the regionally distinct potencies of the genital ridge, which induce testis differentiation. In this study, we examined the anteroposterior axis‐dependent differences in testis‐differentiation potencies by using cultures of anterior, middle, and posterior segments of the XY genital ridge. The inducible pattern of Sertoli cell differentiation showed a center‐to‐pole wave similar to the initial Sry expression pattern. In contrast, the ability to induce Leydig cell differentiation emanated from the anterior segment and then spread to the posterior side. These findings suggest the presence of two distinct dynamic waves in the capacity of the genital ridge to induce Sertoli or Leydig cell differentiation at early phases of testis differentiation. Developmental Dynamics 228:247–253, 2003. © 2003 Wiley‐Liss, Inc.