The aim of the present study was to determine whether the fetal lamb brain has the capacity to aromatize androgens to estrogens during the critical period for sexual differentiation. We also determined whether administration of the aromatase-inhibitor 1,4,6-androstatriene-3,17-dione (ATD) could cross the placenta and inhibit aromatase activity (AA) in fetal brain. Eight pregnant ewes were utilized. On Day 50 of pregnancy, four ewes were given ATD-filled Silastic implants, and the other four ewes received sham surgeries. The fetuses were surgically delivered 2 wk later (Day 64 of gestation). High levels of AA (0.8–1.4 pmol/h/mg protein) were present in the hypothalamus and amygdala. Lower levels (0.02–0.1 pmol/h/mg protein) were measured in brain stem regions, cortex, and olfactory bulbs. The Michaelis-Menten dissociation constant (K_m) for aromatase in the fetal sheep brain was 3–4 nM. No significant sex differences in AA were observed in brain. Treatment with ATD produced significant inhibition of AA in most brain areas but did not significantly alter serum profiles of the major sex steroids in maternal and fetal serum. Concentrations of testosterone in serum from the umbilical artery and vein were significantly greater in male than in female fetuses. No other sex differences in serum steroids were observed. These data demonstrate that high levels of AA are found in the fetal sheep hypothalamus and amygdala during the critical period for sexual differentiation. They also demonstrate that AA can be inhibited in the fetal lamb brain by treating the mother with ATD, without harming fetal development.