In tammar wallabies, Macropus eugenii, the uterine environment plays a key role in regulating development, because during the first two-thirds of gestation an acellular mucoid coat and shell prevent direct cell-cell contact between the endometrium and embryonic cells. This control is seen very clearly in the facultative lactational diapause of tammars. Removal of the suckled pouch young during the breeding season terminates diapause, leading to a distinct increase in metabolic activity of the embryo. By Day 4, oxidative metabolism of glucose has substantially increased, providing a four-fold increase in ATP production. By Day 5, RNA synthesis has increased. These changes are dependent on progesterone-induced changes in uterine secretions. By Day 3, there is greater progesterone secretion by the corpus luteum and, by Day 4, uterine protein synthesis has increased. The nature of the uterine regulatory factor is still not known. There are changes in some uterine proteins, but no detectable change in ionic components of the uterine fluid. Only one defined potential regulator, platelet-activating factor, has been identified, the concentration of which increased during reactivation. The influence of the steroid hormones progesterone and oestradiol on the uterus and diapausing embryo, and other changes that occur later in development, are also discussed in the present review.