The influence of a cryptorchid milieu on the initiation of spermatogenesis was studied, utilizing the technique of transplantation of newborn rat testes into cryptorchid testes of adult hosts. The histological changes in the host and the transplanted testes were evaluated at various periods after transplantation. The transplant showed progressive growth and differentiation of the germ cells up to mid-pachytene stage within 30 days of transplantation into the cryptorchid testes. Thereafter, further progression of spermatogenesis did not occur and the germ cells gradually degenerated. Within 60 days, the seminiferous tubules in the transplant were lined by a layer of Sertoli cells and were comparable in appearance to the host tissue. In another group of animals where the cryptorchid testis was returned to the scrotum at the time of transplantation, both initiation and completion of spermatogenesis were observed. The results indicate that a cryptorchid milieu does not interfere with the initiation of spermatogenesis, but prevents its progression and maintenance.