Dosage-sensitive sex reversal, adrenal hypoplasia congenita (AHC) critical region on the X chromosome, gene 1 (Dax1) is an orphan nuclear receptor essential for development and function of the mammalian adrenal cortex and gonads. DAX1 was cloned as the gene responsible for X-linked AHC, which is characterized by adrenocortical failure necessitating glucocorticoid replacement. Contrary to these human data, young mice with genetic Dax1 knockout (Dax1(-/Y)) exhibit adrenocortical hyperfunction, consistent with the historic description of Dax1 as a transcriptional repressor that inhibits steroidogenic factor 1-dependent steroidogenesis. This paradox of molecular function and two apparently opposite phenotypes associated with Dax1 deficiency in mice and humans is compounded by the recent observations that under certain circumstances, Dax1 can serve as a transcriptional activator of steroidogenic factor 1. The recently revealed role of Dax1 in embryonic stem cell pluripotency, together with the observation that its expression in the adult adrenal is restricted to the subcapsular cortex, where presumptive undifferentiated progenitor cells reside, has led us to reexamine the phenotype of Dax1(-/Y) mice in order to reconcile the conflicting mouse and human data. In this report, we demonstrate that although young Dax1(-/Y) mice have enhanced steroidogenesis and subcapsular adrenocortical proliferation, as these mice age, they exhibit declining adrenal growth, decreasing adrenal steroidogenic capacity, and a reversal of their initial enhanced hormonal sensitivity. Together with a marked adrenal dysplasia in aging mice, these data reveal that both Dax1(-/Y) mice and patients with X-linked AHC exhibit adrenal failure that is consistent with adrenocortical subcapsular progenitor cell depletion and argue for a significant role of Dax1 in maintenance of these cells.