Background: Oestradiol is a steroid hormone that exerts extensive influence on brain development and is a powerful modulator of hippocampal structure and function. The hippocampus is a critical brain region regulating complex cognitive and emotional responses and is implicated in the aetiology of several mental health disorders, many of which exhibit some degree of sex difference. Many sex differences in the adult rat brain are determined by oestradiol action during a sensitive period of development. We had previously reported a sex difference in rates of cell genesis in the developing hippocampus of the laboratory rat. Males generate more new cells on average than females. The current study explored the effects of both exogenous and endogenous oestradiol on this sex difference. Methods: New born male and female rat pups were injected with the mitotic marker 5-bromo-2-deoxyuridine (BrdU) and oestradiol or agents that antagonize oestradiol action. The effects on cell number, proliferation, differentiation and survival were assessed at several time points. Significant differences between groups were determined by two- or thee-Way ANOVA. Results: Newborn males had higher rates of cell proliferation than females. Oestradiol treatment increased cell proliferation in neonatal females, but not males, and in the CA1 region many of these cells differentiated into neurons. The increased rate of proliferation induced by neonatal oestradiol persisted until at least 3 weeks of age, suggesting an organizational effect. Administering the aromatase inhibitor, formestane, or the oestrogen receptor antagonist, tamoxifen, significantly decreased the number of new cells in males but not females. Conclusion: Endogenous oestradiol increased the rate of cell proliferation observed in newborn males compared to females. This sex difference in neonatal neurogenesis may have implications for adult differences in learning strategy, stress responsivity or vulnerability to damage or disease.