1. Culture media and conditions were developed to maximize the sexual development of <I>Nannizzia incurvata</I> using liquid culture and solid media, modified Sabouraud's 1/6 salts + hair medium being the most suitable. 2. Strong evidence for the existence of two sex hormones which regulate sexual differentiation was found. It is proposed that these hormones are named (+)-factor (which is produced by (+)-cells and induce a sexual response in (-)-cells) and (-)-factor (which is produced by (-)-cells and induce a sexual response in (+)-cells). 3. Addition of active extracts of concentrated mated culture filtrates caused a switch from asexual to sexual development and the formation of the characteristic sexual cleistothecia. The hormones present are probably extracellular, as mycelial extracts do not cause this response. 4. Further evidence for the existence of these sex hormones was achieved by separation of compatible strains by a semi-permeable membrane, cellophane, which allowed diffusion of the hormones through the medium yet prevented physical, hyphal interactions between the two strains. Sexual morphogenesis occurred in both strains. 5. Both (+)-factor and (-)-factor were shown to be non-volatile by further experiments separating colonies with cellophane membranes. 6. (-)-Factor was solvent extractable using diethyl ether or ethyl acetate, while (+)-factor remained in the aqueous phase. Thus, (-)-factor is more hydrophobic yet less polar and (+)-factor is more hydrophilic yet more polar.