Although the genetic triggers for gonadal sex differentiation vary across species, the cell biology of gonadal development was long thought to be largely conserved. Here, we present a comprehensive analysis of gonadal sex differentiation, using single-cell sequencing in the embryonic chicken gonad during sexual differentiation. The data show that chicken embryonic-supporting cells do not derive from the coelomic epithelium, in contrast to other vertebrates studied. Instead, they derive from a DMRT1+/PAX2+/WNT4+/OSR1+ mesenchymal cell population. We find a greater complexity of gonadal cell types than previously thought, including the identification of two distinct sub-populations of Sertoli cells in developing testes and derivation of embryonic steroidogenic cells from a differentiated supporting-cell lineage. Altogether, these results indicate that, just as the genetic trigger for sex differs across vertebrate groups, cell lineage specification in the gonad may also vary substantially. Display omitted •Chicken gonadal supporting cell lineage is not derived from the coelomic epithelium•Chicken supporting cells derive from a DMRT1+/OSR1+/PAX2+/WNT4+ mesenchyme population•PAX2 is a novel marker of undifferentiated supporting cell progenitors in chicken•Chicken steroidogenic cells derive from pre-differentiated supporting cells Gonadal cell-lineage specification during embryogenesis has long been thought to be similar among vertebrates. In this chicken study, Estermann et al. show that this is not the case, finding major differences between mouse and chicken. This study provides evolutionary insights into gonadal sex differentiation.