The African clawed frog Xenopus laevis has a female heterogametic ZZ/ZW-type sex-determining system. We previously discovered a W-linked female sex-determining gene dm-W that is involved in ovary formation, probably through the up-regulation of the estrogen synthesis genes cyp19a1 and foxl2. We also reported that a unique “mass-in-line structure”, which disappears from ZZ gonads during early testicular development, might serve as the basis for ovary differentiation in ZW gonads. However, the molecular mechanisms underlying early masculinization are poorly understood. To elucidate the development of bipotential gonads into testes after sex determination in this species, we focused on the orthologs of five mammalian sex-related genes: three nuclear factor genes, dax1, sf1 (also known as ad4bp), and sox9, and two genes encoding members of the tumor growth factor-β (TGF-β) family, anti-Müllerian hormone (amh) and inhibin βb (inhbb). Quantitative RT-PCR analysis revealed that the expression of dax1, sox9, amh, and inhbb or sf1 was greatly or slightly higher in ZZ than in ZW gonads during early sex development. In situ hybridization analysis revealed that amh and inhbb mRNAs were expressed in somatic cells on the inner and outer sides of cell masses in the mass-in-line structure, respectively, in the developing ZZ gonads. Interestingly, estrogen exposure prevented the disappearance of the mass-in-line structure in early developing ZZ tadpoles. These findings suggest that TGF-β signaling is involved in the destruction of the mass-in-line structure, which may be maintained by estrogen.