Androgens play a critical role in the development of the male reproductive system, including the positioning of the gonads. It is not clear, however, which developmental processes are influenced by androgens and what are the target tissues and cells mediating androgen signaling during testicular descent. Using a Cre-loxP approach, we have produced male mice (GU-ARKO) with conditional inactivation of the androgen receptor (Ar) gene in the gubernacular ligament connecting the epididymis to the caudal abdominal wall. The GU-ARKO males had normal testosterone levels but developed cryptorchidism with the testes located in a suprascrotal position. Although initially subfertile, the GU-ARKO males became sterile with age. We have shown that during development, the mutant gubernaculum failed to undergo eversion, a process giving rise to the processus vaginalis, a peritoneal outpouching inside the scrotum. As a result, the cremasteric sac did not form properly, and the testes remained in the low abdominal position. Abnormal development of the cremaster muscles in the GU-ARKO males suggested the participation of androgens in myogenic differentiation; however, males with conditional AR inactivation in the striated or smooth muscle cells had a normal testicular descent. Gene expression analysis showed that AR deficiency in GU-ARKO males led to the misexpression of genes involved in muscle differentiation, cell signaling, and extracellular space remodeling. We therefore conclude that AR signaling in gubernacular cells is required for gubernaculum eversion and outgrowth. The GU-ARKO mice provide a valuable model of isolated cryptorchidism, one of the most common birth defects in newborn boys.