Development of external genitalia (ExG) has been a topic of long mystery in the field of organogenesis research. Early stage male and female of mouse embryos develop a common genital tubercle (GT) in the perineum whose outgrowth extends distally from the posterior cloacal regions. Concomitant with GT outgrowth, the cloaca is divided into urogenital sinus and anorectum by urorectal septum (URS) internally. The outgrowth of the GT is associated with the formation of endodermal epithelial urethral plate (UP) attached to the ventral epidermis of the GT. Such a common developmental phase is observed until around embryonic day 15.5 (E15.5) morphologically in mouse embryogenesis. Various growth factor genes, such as Fibroblast growth factor (Fgf) and Wnt genes are expressed and function during GT formation. Since the discovery of key growth factor signals and several regulatory molecules, elucidation of their functions has been achieved utilizing mouse developmental models, conditional gene knockout mouse and in vitro culture. Analyses on the phenotypes of such mouse models have revealed that several growth factor families play fundamental roles in ExG organogenesis based on the epithelial-mesenchymal interaction (EMI). More recently, EMI between developing urethral epithelia and its bilateral mesenchyme of later stages is also reported during subsequent stage of androgen-dependent male-type urethral formation in the mouse embryo. Mafb, belonging to AP-1 family and a key androgen-responsive mesenchymal gene, is identified and starts to be expressed around E14.5 when masculinization of the urethra is initiated. Mesenchymal cell condensation and migration, which are regulated by nonmuscle myosin, are shown to be essential process for masculinization. Hence, studies on EMI at various embryonic stages are important not only for early but also for subsequent masculinization of the urethra. In this review, a dynamic mode of EMI for both early and late phases of ExG development is discussed.