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The proliferation of germ cells becomes sexually dimorphic during gonadal sex differentiation, although the underlying dynamics of this are not well understood in vertebrates. By tracing GFP-labeled germ cells in vivo and analyzing the germ cell-depleted mutant, zenzai, we show that the proliferation and differentiation of germ cells are regulated in a sexually dimorphic manner in the teleost fish medaka. In the undifferentiated gonads, germ cells resume proliferation by slow intermittent division (type I), producing isolated daughter cells. While germ cells in the male gonads continue this mode of proliferation, some germ cell fractions in the female gonads initiate two to four rounds of continuous division (type II), forming cysts of four, eight, or sixteen cells, which subsequently enter meiosis synchronously. Thus, female germ cells become differentiated much earlier than do male germ cells. In the zenzai mutant, a defect in slow intermittent division eventually leads to the depletion of germ cells in the adult gonads in both sexes, despite the fact that cyst-forming division is unaffected. This argues that slow intermittent division is essential for the maintenance of germ cells. The proliferation and differentiation of germ cells are thus important components of gonadal sex differentiation in vertebrates.