The process of fetal external genitalia development might be divided into two processes. The first process accomplishes the initial outgrowth of the anlage, genital tubercle (GT). Previous analysis suggests that the distal urethral epithelium (DUE) of the GT, the Fgf8-expressing region, regulates the outgrowth of the GT. The second process eventually generates the sexually dimorphic development of the external genitalia, which is dependent on the action of steroid hormones. Several key genes, for example, RARs, RXRs, RALDH2, and CYP26, were dynamically expressed during GT development. The teratogenic dose of RA at 9.0 d.p.c. induced a drastic malformation of the urethral plate during GT formation, but did not show gross abnormalities in its outgrowth. In RA-treated embryos, Fgf8 expression was still detected in the distal GT regions. Possible regulatory roles of the FGF and RA signaling systems in external genitalia formation are discussed.