Mammalian sex determination initiates in the fetal gonad with specification of bipotential precursor cells into male Sertoli cells or female granulosa cells. This choice was long presumed to be irreversible, but genetic analysis in the mouse recently revealed that sexual fates must be maintained throughout life. Somatic cells in the testis or ovary, even in adults, can be induced to transdifferentiate to their opposite-sex equivalents by loss of a single transcription factor, DMRT1 in the testis or FOXL2 in the ovary. Here, we investigate what mechanism DMRT1 prevents from triggering transdifferentiation. We find that DMRT1 blocks testicular retinoic acid (RA) signaling from activating genes normally involved in female sex determination and ovarian development and show that inappropriate activation of these genes can drive sexual transdifferentiation. By preventing activation of potential feminizing genes, DMRT1 allows Sertoli cells to participate in RA signaling, which is essential for reproduction, without being sexually reprogrammed.