The predisposition of the testis and ovary to primarily synthesize testosterone (T) and estradiol (E2), respectively, is due to gonadal-specific cell types that differentially express the various hydroxysteroid (17β) dehydrogenase (HSD17B) isoforms. In testes, Leydig cells rely on LH stimulation to maintain expression of the type 3 (HSD17B3) isoform, which specifically converts androstenedione to T. In ovaries, thecal interstitial (TI) cells also rely on LH to induce androgen synthesis but lack HSD17B3 and therefore secrete androgens of low biological activity. Therefore, thecal cells may possess a mechanism to repress the Leydig cell phenotype and HSD17B3 expression. E2 is known to inhibit experimentally Leydig cell function and proliferation. In the current study, we provide evidence that E2 prevents the development of functional Leydig-like cells in the murine ovary and that this action is mediated by estrogen receptor (ER) α. ERα-null (αERKO) female mice exhibit testis-like levels of Hsd17b3 expression in the ovaries and male-like levels of plasma T. Herein, we demonstrate that: 1) Hsd17b3 expression in αERKO ovaries is a primary effect of the loss of intraovarian ERα actions; 2) αERKO ovarian cells produce substantial levels of T in vitro, and this is blocked by a HSD17B3-specific inhibitor; 3) Hsd17b3 expression in αERKO ovaries is LH regulated and localized to the secondary interstitial (SI)/TI cells; and 4) αERKO SI/TI cells possess Leydig-like ultrastructural features. These data indicate that intraovarian ERα actions are required to repress Hsd17b3 expression in the ovary and may be important to maintaining a female phenotype in SI/TI cells.