Brain and behavior of teleosts are highly sexually plastic throughout life, yet the underlying neural mechanisms are largely unknown. On examining brain morphology in the teleost medaka (Oryzias latipes), we identified distinctively large neurons in the magnocellular preoptic nucleus that occurred much more abundantly in females than in males. Examination of sex-reversed medaka showed that the sexually dimorphic abundance of these neurons is dependent on gonadal phenotype, but independent of sex chromosome complement. Most of these neurons in females, but none in males, produced neuropeptide B (Npb), whose expression is known to be estrogen-dependent and associated with female sexual receptivity. In phenotypic analysis, the female-specific Npb neurons had a large euchromatic nucleus with an abundant cytoplasm containing plentiful rough endoplasmic reticulum, exhibited increased overall transcriptional activity, and typically displayed a spontaneous regular firing pattern. These phenotypes, which are probably indicative of cellular activation, were attenuated by ovariectomy and restored by estrogen replacement. Furthermore, the population of Npb-expressing neurons emerged in adult males treated with estrogen, not through frequently occurring neurogenesis in the adult teleost brain, but through the activation of preexisting, quiescent male counterpart neurons. Collectively, our results demonstrate that the morphological, transcriptional, and electrophysiological phenotypes of sexually dimorphic preoptic Npb neurons are highly dependent on estrogen and can be switched between female and male patterns. These properties of the preoptic Npb neurons presumably underpin the neural mechanism for sexual differentiation and plasticity of brain and behavior in teleosts.