In Drosophila, the sex of XX germ cells is determined by somatic signals. Whether sex-specific genes, however, are activated or repressed by somatic signals is not known. We have used mgm1, a germline-marker which is specifically expressed in male germ cells to analyze sex-specific gene expression of embryonic germ cells. We found that XX and XY germ cells that do not contact gonadal tissue can express mgm1. In contrast, XX germ cells that were associated with female somatic gonadal cells never expressed mgm1. Our results suggest that XX germ cells express male-specific genes, unless these genes are repressed by feminizing short range signals produced by the somatic cells of the prospective ovary.