Zebrafish gonadal sexual differentiation is an important but poorly understood subject. The difficulty in investigating zebrafish sexual development lies in its sex determination plasticity, the lack of morphological tools to distinguish juvenile females from males, and the lack of sex chromosomes in laboratory strains. Zebrafish sexual differentiation starts at around 8 days post-fertilization when germ cells start to proliferate. The number of germ cells determines the future sex of the gonad. Gonads with more germ cells differentiate into ovaries, whereas a reduced germ cell number leads to male-biased sexual differentiation. Genes controlling sexual differentiation in pre-meiotic gonads encode proteins such as transcription factors, the transforming growth factor (TGF)-β family of signaling proteins, and RNA-binding proteins. These proteins coordinately control germ cell proliferation/meiosis/maintenance and gonadal somatic cell differentiation, leading to stepwise differentiation of gonads. Morphological changes in differentiating gonads are characterized by the appearance of oocytes containing condensed chromatin, followed by incorporation of vitellogenin and oocyte maturation. Marker genes and morphological characteristics help distinguish the steps in zebrafish gonadal differentiation during this important sex-determining stage.