BACKGROUND: Sex differences are present in many neuropsychiatric conditions that affect emotion and approach-avoidance behavior. One potential mechanism underlying such observations is testosterone in early development. Although much is known about the effects of testosterone in adolescence and adulthood, little is known in humans about how testosterone in fetal development influences later neural sensitivity to valenced facial cues and approach-avoidance behavioral tendencies. METHODS: With functional magnetic resonance imaging we scanned 25 8-11-year-old children while viewing happy, fear, neutral, or scrambled faces. Fetal testosterone (FT) was measured via amniotic fluid sampled between 13 and 20 weeks gestation. Behavioral approach-avoidance tendencies were measured via parental report on the Sensitivity to Punishment and Sensitivity to Rewards questionnaire. RESULTS: Increasing FT predicted enhanced selectivity for positive compared with negatively valenced facial cues in reward-related regions such as caudate, putamen, and nucleus accumbens but not the amygdala. Statistical mediation analyses showed that increasing FT predicts increased behavioral approach tendencies by biasing caudate, putamen, and nucleus accumbens but not amygdala to be more responsive to positive compared with negatively valenced cues. In contrast, FT was not predictive of behavioral avoidance tendencies, either through direct or neurally mediated paths. CONCLUSIONS: This work suggests that testosterone in humans acts as a fetal programming mechanism on the reward system and influences behavioral approach tendencies later in life. As a mechanism influencing atypical development, FT might be important across a range of neuropsychiatric conditions that asymmetrically affect the sexes, the reward system, emotion processing, and approach behavior.