The influence of the hedgehog signaling pathway on reproduction was studied in transgenic mice in which a dominant active allele of the hedgehog signal transducer, smoothened (Smo), was conditionally expressed in the developing Müllerian duct and gonads through recombination mediated by anti-Müllerian hormone receptor 2-cre (Amhr2 cre). Previous studies showed that development of the oviduct and uterus are abnormal in female Amhr2 cre/+ SmoM2 mice. In the current study, focusing on mutant males, litter size was reduced 53% in crosses with wild-type females. An extra band of undifferentiated tissue extended along each epididymis and vas deferens, a position suggesting derivation from Müllerian ducts that failed to regress fully. Hedgehog signaling was elevated in this tissue, based on mRNA levels of target genes. Amhr2 mRNA was dramatically reduced in the uterus of mutant females and in the extra tissue in the tract of mutant males, suggesting that AMHR2 signaling was inadequate for complete Müllerian duct regression. Spermatogenesis and sperm motility were normal, but testis weight was reduced 37% and epididymal sperm number was reduced 36%. The number of sperm recovered from the uteri of wild-type females after mating with mutant males was reduced 78%. This suggested that sperm transport through the male tract was reduced, resulting in fewer sperm in the ejaculate. Consistent with this, mutant males had unusually tortuous vas deferentia with constrictions within the lumen. We concluded that persistence of a relatively undifferentiated remnant of Müllerian tissue is sufficient to cause subtle changes in the male reproductive tract that reduce fertility.