Spermatogenesis requires androgen but, paradoxically, oestradiol (E2) treatment stimulates spermatogenic development in gonadotrophin- and androgen-deficient hypogonadal (hpg) mice. The mechanisms of E2-induced spermatogenesis were investigated by determining intratesticular E2 levels and testis cell populations in E2-treated hpg male mice, and E2 spermatogenic actions were determined in androgen receptor-knockout (ARKO) mice. Despite increased serum E2 concentrations (150–300 pmol L–1), intratesticular E2 concentrations declined fivefold (P < 0.001) in E2-treated v. untreated hpg male mice. Serum FSH reached 40% of normal and total testicular numbers of known FSH-responsive Sertoli, spermatogonia and meiotic spermatocyte populations were significantly (P < 0.001) elevated 1.7-, 4- and 13-fold, respectively. However, E2 administration also increased androgen-dependent pachytene spermatocytes and post-meiotic spermatids to levels comparable with testosterone-treated hpg testes. Selective investigation of androgen receptor involvement used E2-treated ARKO mice, which were found to exhibit increased (1.6-fold; P < 0.05) intratesticular E2 concentrations and suppression of the elevated serum gonadotrophins, although FSH remained twofold higher than normal. However, testis size and total Sertoli, spermatogonia and spermatocyte numbers were not increased in E2-treated ARKO male mice. Therefore, E2-stimulated murine spermatogenic development occurs with markedly suppressed and not elevated intratesticular E2 levels and displays an absolute requirement for functional androgen receptors. We propose that this paradoxical E2 spermatogenic response is explained by predominantly extratesticular E2 actions, increasing FSH to combine with residual androgen activity in hpg testes to stimulate pre- to post-meiotic development.