An opportunity arose to obtain humphead wrasse Cheilinus undulatus specimens between 2006 and 2009 from Indonesia, the major source and exporting country of this species, making study on its early gonad development possible for the first time. Protogynous hermaphroditism, previously proposed for this species, was confirmed in this study. Based on histological examination of 178 specimens, mainly <500 mm total length (LT) and ranging from 208 to 1290 mm LT (119·1 g to 43·0 kg whole body mass), the minimum body sizes for female and male sexual maturation were determined to be 650 and 845 mm LT, respectively. Primary male development through juvenile sexual differentiation was not detected. A unique blind pouch, with a possible sperm storage function and associated with the testis, was reported for the first time in the Labridae. In Hong Kong retail markets, the global trading centre for this valuable species, live C. undulatus on sale for food were dominated by body sizes <500 mm LT between 1995 and 2009, reflecting an international trade largely focused on juveniles. In consideration of these findings, and given the threatened status of this species, management for C. undulatus capture and trade nationally and internationally are discussed with recommendations for ensuring sufficient spawning biomass in exploited populations and for sustainable trade.