We report the case of an infant who presented at birth with a hypoplastic phallus associated with hypospadias. Low testosterone production, normal serum levels of steroid precursors, and increased LH in response to LH-releasing hormone supported a defect in Leydig cell differentiation or function. Conventional microscopic study of the testes showed fibroblastic cells in the interstitium. However immunocytochemical analysis using anti-LH receptor and anti-P450c17 antibodies demonstrated that about one third of these cells were Leydig cells or precursors of Leydig cells. No histological feature could distinguish the latter cells from fibroblasts. A homozygous substitution of cysteine 133 for arginine was found in the extracellular domain of the receptor. This is the first naturally occurring missense mutation found in the extracellular domain of the LH receptor. COS-7 cells transfected with the mutant receptor exhibited a marked impairment of hCG binding, whereas some cAMP production could be observed at high hCG concentrations. We propose that the partial impairment of LH receptor function, as reflected by the presence of Leydig cells, was responsible for the incomplete male pseudohermaphroditism observed in our patient.