The SRY gene on the human, mouse, and marsupial Y chromosomes is the testis-determining gene that initiates male development in mammals. The SRY protein has a DNA-binding domain (high mobility group or HMG box) similar to those found in the high-mobility-group proteins. SRY is specific for the Y chromosome, but many autosomal genes have been identified that possess a similar HMG box region; those with the most closely SRY-related box regions form a gene family now referred to as SOX genes. We have identified a sequence on the marsupial X chromosome that shares homology with SRY. Sequence comparisons show near-identity with the mouse and human SOX3 gene (formerly called a3), the SOX gene which is the most closely related to SRY. We suggest here that the highly conserved X chromosome-linked SOX3 represents the ancestral SOX gene from which the sex-determining gene SRY was derived. In this model SOX3/SRY divergence and the acquisition of a testis-determining role by SRY might have preceded (and initiated) sex chromosome differentiation or, alternatively, might have been a consequence of X chromosome-Y chromosome differentiation initiated at the locus of an original sex-determining gene(s), later superseded by SRY.