Hypospadias, a developmental defect of the penis, is one of the most common congenital malformations in humans. Its incidence has rapidly increased over recent decades, and this has been largely attributed to our increased exposure to endocrine disrupting chemicals. Penis development is primarily an androgen driven process, however estrogen and xenoestrogens are known to affect penis development in both humans and mice. Here, we investigated the role of estrogen in the developing penis. Using a novel penis culture system and transcriptomics we showed that exogenous estrogen directly targets the developing penis altering gene expression profiles resulting in hypospadias. In addition, we also uncovered an unexpected endogenous role for estrogen in normal penis development and showed that a loss of estrogen signaling results in a mild hypospadias phenotype, the most common manifestation of this disease in humans. Our findings demonstrate that a delicate balance of androgen and estrogen signaling is intrinsically required for normal gene expression and urethral closure. These findings broaden our understanding of the impact of endocrine disruptors on early development and demonstrate that penis development is not an entirely androgen driven process, but one in which endogenous estrogen signaling also plays a critical role.