Brain sexual differentiation in rodents results from the perinatal testicular androgen surge. In the preoptic area (POA), estradiol aromatized from testosterone upregulates the production of the proinflammatory molecule, prostaglandin E₂ (PGE₂) to produce sex-specific brain development. PGE₂ produces a two-fold greater density of dendritic spines in males than in females and masculinizes adult copulatory behavior. One neonatal dose of PGE₂ masculinizes the POA and behavior, and simultaneous treatment with an inhibitor of additional prostaglandin synthesis prevents this masculinization, indicating a positive feedforward process that leads to sustained increases in PGE₂. The mechanisms underlying this feedforward process were unknown. Microglia, the primary immunocompetent cells in the brain, are active neonatally, contribute to normal brain development, and both produce and respond to prostaglandins. We investigated whether there are sex differences in microglia in the POA and whether they influence developmental masculinization. Neonatal males had twice as many ameboid microglia as females and a more activated morphological profile, and both estradiol and PGE₂ masculinized microglial number and morphology in females. Microglial inhibition during the critical period for sexual differentiation prevented sex differences in microglia, estradiol-induced masculinization of dendritic spine density, and adult copulatory behavior. Microglial inhibition also prevented the estradiol-induced upregulation of PGE₂, indicating that microglia are essential to the feedforward process through which estradiol upregulates prostaglandin production. These studies demonstrate that immune cells in the brain interact with the nervous and endocrine systems during development, and are crucial for sexual differentiation of brain and behavior.