We have evaluated whether the arachidonic acid cascade may be involved in the folding and fusion of the penis and scrotum in masculine differentiation, a possibility raised by recent observations of the involvement of the arachidonic acid cascade in the analogous embryonic processes of elevation and fusion of the palatal shelves and of folding and fusion of the neural tube. To test this hypothesis, during embryonic masculine differentiation in mice of the B10.A strain, we administered certain agents that produce blockade of masculinization. We report that arachidonic acid can reverse the inhibition of masculine development in male embryos produced by estradiol-17 beta or by cyproterone acetate, an androgen receptor-site blocker, and that such reversal can be prevented by an inhibitor of cyclooxygenase, such as indomethacin. We have also found that agents that block the arachidonic acid cascade at the level of phospholipase A2 (cortisone, phenytoin) or at the level of cyclooxygenase (indomethacin, aspirin) also block masculine differentiation and that such antimasculinization is reversed by arachidonic acid. The masculinization of male embryos is inhibited by indomethacin and aspirin, and the masculinization of female embryos produced by exogenous testosterone is prevented by indomethacin. These findings provide evidence that the mechanism by which testosterone organizes the genitalia involves a role of the arachidonic acid cascade leading to prostaglandins at a critical period of development and that interference with testosterone synthesis or action leads to a teratogenic deficiency of arachidonic acid during this time in the genital anlagen.