The benefits of sexual reproduction that outweigh its costs have long puzzled biologists. Increased genetic diversity generated by new allelic combinations, as enhanced by recombination during meiosis, is considered to be a primary benefit of sex. Sex-determining systems have evolved independently on numerous occasions. One of the most familiar is the use of sex chromosomes in vertebrates. Other eukaryotic groups also use sex chromosomes or smaller sex-determining regions within their chromosomes, such as the mating type loci in the fungi. In these organisms, sexual reproduction and its associated meiotic recombination is controlled by regions of the genome that are themselves blocked in recombination. Non-recombining DNA that is essential for recombination presents a paradox. One hypothesis is that sex-determination requires or leads to highly diverse alleles, establishing this block in recombination. A second hypothesis to account for the common occurrence of these types of sex-determining systems is that they combine mechanisms for recombination suppression and reproductive isolation, thereby promoting the evolution of new species. The fungal kingdom represents the ideal eukaryotic lineage to elucidate the functions of non-recombining regions in sex-determination and speciation.