Male and female fetuses differ in testosterone concentrations beginning as early as week 8 of gestation. This early hormone difference exerts permanent influences on brain development and behavior. Contemporary research shows that hormones are particularly important for the development of sex-typical childhood behavior, including toy choices, which until recently were thought to result solely from sociocultural influences. Prenatal testosterone exposure also appears to influence sexual orientation and gender identity, as well as some, but not all, sex-related cognitive, motor and personality characteristics. Neural mechanisms responsible for these hormone-induced behavioral outcomes are beginning to be identified, and current evidence suggests involvement of the hypothalamus and amygdala, as well as interhemispheric connectivity, and cortical areas involved in visual processing.