Vitamin A (also called retinol) and its derivatives, retinoic acids (RAs), are required for postnatal testicular function. Abnormal spermatogenesis is observed in rodents on vitamin A-deficient diets and in retinoic acid receptor α (RARα) knockout mice. In contrast, RA has an inhibitory effect on the XY gonad development in embryos. To characterize this inhibitory effect of RA, we investigated the cellular events that are required for the XY gonad development, including cell migration from the adjacent mesonephros into the gonad, fetal Sertoli cell differentiation, and survival of gonocytes. In organ cultures of Embryonic Day 13 (E13) XY gonads from rats, all-trans-retinoic acid (tRA) inhibited mesonephric cell migration into the gonad. Moreover, treatment with tRA decreased the expression of Müllerian-inhibiting substance in Sertoli cells and dramatically reduced the number of gonocytes. Increased apoptosis was detected in the XY gonads cultured with tRA, suggesting that the loss of gonocytes could be due to increased apoptosis. In addition, Am580, a synthetic compound that exhibits RARα-specific agonistic properties, mimicked the inhibitory effects of tRA on the XY gonad development including mesonephric cell migration and gonocyte survival. Conversely, a RARα-selective antagonist, Ro 41-5253, suppressed the inhibitory ability of tRA on the XY gonad development. These results suggest that retinoic acid acting through RARα negatively affects fetal Sertoli cell differentiation and gonocyte survival and blocks the migration of mesonephric cells, thereby leading to inhibition of the XY gonad development.