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The hundreds of sex differences found in the brain beg the question as to how they develop and what is their function. Factors that cause sex differences in the brain are sex chromosomal gene expression, gonadal hormones, and environmental interactions. Parsimony dictates that these factors act directly on the brain. In fact, available literature on sexual differentiation of the mammalian brain by and large considers just two organs: the gonads and the brain. This perspective, which leaves out all other body parts, misleads us in several ways. First, there is accumulating evidence that all organs are sexually differentiated, and that sex differences in peripheral organs affect the brain. For example, there are sex differences in muscles, adipose tissue, the liver, immune system, gut, kidneys, bladder, and placenta that directly affect the nervous system and behavior. Sex differences may therefore develop in part because brains reside in fundamentally different bodies. This has consequences for brain function as well. Brains may generate different output autonomously, but if they are wired up to different bodies, similar output will have different consequences. To generate similar behaviors, the nervous system may have to compensate by giving different commands. This interaction between body and brain has to be taken into account for a full understanding of the development as well as function of sex differences in the brain. Considering the consequences of this interaction also provides possible explanations for the often remarkable sex differences in neurological and behavioral disorders. These principles will be demonstrated by discussing the development and function of sex differences in vasopressin signaling in brain and body.