In mammals, primordial germ cells are specified during fetal life, migrate to the developing gonads and then undergo a critical period of development that is regulated, largely, by somatic cells of the gonadal environment. In a fetal ovary germ cells promptly enter meiosis whereas, in a fetal testis, they enter G1/G0 arrest and remain in a state of quiescence until after birth. I will discuss what we understand so far about the regulation of sex-specific differentiation of germ cells, considering extrinsic molecular cues produced by somatic cells as well as critical intrinsic changes within the germ cells. I will also focus on the molecular pathways that regulate the balance between pluripotency and differentiation, critical for the maintenance of fertility and for the avoidance of germ cell tumor formation.