The differential programming of sperm and eggs in gonads is a fundamental topic in reproductive biology. Although the sexual fate of germ cells is believed to be determined by signaling factors from sexually differentiated somatic cells in fetal gonads, the molecular mechanism that determines germ cell fate is poorly understood. Herein, we show that mothers against decapentaplegic homolog 4 (SMAD4) in germ cells is required for female-type differentiation. Germ cells in Smad4-deficient ovaries respond to retinoic acid signaling but fail to undergo meiotic prophase I, which coincides with the weaker expression of genes required for follicular formation, indicating that SMAD4 signaling is essential for oocyte differentiation and meiotic progression. Intriguingly, germline-specific deletion of Smad4 in Stra8-null female germ cells resulted in the up-regulation of genes required for male gonocyte differentiation, including Nanos2 and PLZF, suggesting the initiation of male-type differentiation in ovaries. Moreover, our transcriptome analyses of mutant ovaries revealed that the sex change phenotype is achieved without global gene expression changes in somatic cells. Our results demonstrate that SMAD4 and STRA8 are essential factors that regulate the female fate of germ cells.