Leydig cells (LCs) are thought to differentiate from spindle-shaped precursor cells that exhibit some aspects of differentiated function, including 3β-hydroxysteroid dehydrogenase (3βHSD) activity. The precursor cells ultimately derive from undifferentiated stem LCs (SLCs), which are postulated to be present in testes before the onset of precursor cell differentiation. We searched for cells in the neonatal rat testis with the abilities to: (i) proliferate and expand indefinitely in vitro (self renew); (ii) differentiate (i.e., 3βHSD and ultimately synthesize testosterone); and (iii) when transplanted into host rat testes, colonize the interstitium and subsequently differentiate in vivo. At one week postpartum, spindle-shaped cells were seen in the testicular interstitium that differed from the precursor cells in that they were 3βHSD-negative, luteinizing hormone (LH) receptor (LHR)-negative, and platelet-derived growth factor receptor α (PDGFRα)-positive. These cells were purified from the testes of one-week-old rats. The cells contained proteins known to be involved in LC development, including GATA4, c-kit receptor, and leukemia inhibitory factor receptor. The putative SLCs expanded over the course of six months while remaining undifferentiated. When treated in media that contained thyroid hormone, insulin-like growth factor I, and LH, 40% of the putative SLCs came to express 3βHSD and to synthesize testosterone. When transplanted into host rat testes from which LCs had been eliminated, the putative SLCs colonized the interstitium and subsequently expressed 3βHSD, demonstrating their ability to differentiate in vivo. We conclude that these cells are likely to be the sought-after SLCs.