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The development of the gonad and the processes of sex differentiation have been studied in the ammocoete of Lampetra planeri, with particular emphasis on the mode of differentiation of the male gonads. After an initial undifferentiated stage during the first larval year, meiotic changes appear, particularly in cell nests, and from these germ cells and from isolated gonocytes, growing oocytes are developed. The initial phase of differentiation is regarded as a female stage, during which auxocytosis occurs on a variable scale in probably all gonads. This is followed in definitive males, by the degeneration of germ cells that have already differentiated in a female sense, either at the early meiotic prophase, or later in the cytoplasmic growth period of the occyte. Even in morphologically differentiated testes, meiotic activity and oocyte growth may be observed, although on a diminishing scale, throughout the greater part of the larval period. More extensive and synchronous atresia of growing oocytes may occur comparatively late in the larval period, giving the appearance of sex inversion. These cases are regarded as examples of abnormally retarded differentiation. Other presumptive male gonads are derived from gonads consisting predominantly of meiotic cysts, which have persisted beyond the age when auxocytosis is normally completed in definitive females. In some cases the future male gonad can be recognized at an early stage by certain morphological and histological criteria, irrespective of the condition of the germ cells. The views of Okkelberg (1921) and D'Ancona (1943, 1949) on the supposed existence of intersexual gonads have been discussed in relation to the quantitative analysis of gonad types. The author believes that the sexual indeterminacy attributed to these animals is illusory and that once differentiation has begun, its course and direction are irreversible. In male differentiation there is some evidence of renewed activity in the peritoneal epithelium of the gonad surface and it is suggested that the somatic elements of the testis may have some inductive effect tending to inhibit the further differentiation of bipotential germ cells in a female direction. No continuity exists between the undifferentiated cell nests of early stages and the cysts of germ cells in the mature testis. The former should not, therefore, be regarded as male elements in an hermaphrodite gonad. At early stages of differentiation, potential male ammocoetes are those in which the gonads are composed predominantly of meiotic cysts, or in which regression is taking place at various phases of oogenesis. The critical period for oocyte growth and for male differentiation occurs at lengths of 60 to 70 mm when the ammocoetes are at the beginning of their third year. From 50 mm upwards the proportion of female gonads consistently exceeds 50% of the total of all types. Analysis of ammocoete populations suggests that there is normally a slight excess of females, but that the sex ratios do not vary widely from one stream to another. No evidence has been found to suggest that environmental factors play any part in sex differentiation or that the sex orientation of the gonad is labile and indeterminate.