Leydig cells were selectively eliminated from the testis by treatment with the cytotoxin, ethane dimethane sulphonate. Rats were then made unilaterally cryptorchid and the morphological and functional response of the interstitial tissue in abdominal compared with scrotal testes was examined for up to 8 weeks. Regeneration of new Leydig cells occurred more rapidly in the interstitial tissue of abdominally cryptorchid testes compared with the interstitial tissue of contralateral scrotal testes. More rapid recovery of Leydig cells was coincident with significant increases in the bioactivity of a local factor(s), collected from interstitial fluid of cryptorchid testes, which stimulated testosterone production by isolated Leydig cells in vitro. These results support the theory that the production of a local factor(s) plays a role in the regeneration of Leydig cells and is affected by damage to the seminiferous epithelium.