Kallmann syndrome is a form of hypogonadotropic hypogonadism also associated with the loss of smell. It is a phenotypically and genetically heterogeneous disorder, with mutations in several known causative genes now accounting for approximately 30% of cases. The prevalence for the disease is also much higher in males than in females, a phenomenon that remains to be fully explained. Here, we show that loss of Prokr2, which is linked to autosomal recessive Kallmann syndrome type 3 (KAL3; OMIM 244200), affects fetal testis differentiation in mice. We find that Prokr2 is specifically expressed in the XY gonads during sex determination and fetal sexual differentiation, and knockout mice display a variable degree of compromised vasculature in the fetal testes. This phenotype offers potential insight into the clinical heterogeneity observed within familial cases, and may contribute to the gender bias in Kallmann syndrome patients.