The dmrt1 (doublesex and mab-3 related transcription factor 1) gene is a key regulator of sex determination and/or gonadal sex differentiation across metazoan animals. This is unusual given that sex determination genes are typically not well conserved. The mechanisms by which zebrafish sex is determined have remained elusive due to the lack of sex chromosomes and the complex polygenic nature of sex determination in domesticated strains. To investigate the role of dmrt1 in zebrafish sex determination and gonad development, we isolated mutations disrupting this gene. We found that the majority of dmrt1 mutant fish develop as fertile females suggesting a complete male-to-female sex reversal in mutant animals that would have otherwise developed as males. A small percentage of mutant animals became males, but were sterile and displayed testicular dysgenesis. Therefore zebrafish dmrt1 functions in male sex determination and testis development. Mutant males had aberrant gonadal development at the onset of gonadal sex-differentiation, displaying reduced oocyte apoptosis followed by development of intersex gonads and failed testis morphogenesis and spermatogenesis. By contrast, female ovaries developed normally. We found that Dmrt1 is necessary for normal transcriptional regulation of the amh (anti-Müllerian hormone) and foxl2 (forkhead box L2) genes, which are thought to be important for male or female sexual development respectively. Interestingly, we identified one dmrt1 mutant allele that co-operates with a linked segregation distorter locus to generate an apparent XY sex determination mechanism. We conclude that dmrt1 is dispensable for ovary development but necessary for testis development in zebrafish, and that dmrt1 promotes male development by transcriptionally regulating male and female genes as has been described in other animals. Furthermore, the strong sex-ratio bias caused by dmrt1 reduction-of-function points to potential mechanisms through which sex chromosomes may evolve.