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The reproductive biology of the Panama graysby Cephalopholis panamensis was studied from collections and behavioural observations made in the Gulf of California from 2001 to 2006. Histological examinations, particularly the identification of gonads undergoing sexual transition, confirmed a protogynous hermaphroditic sexual pattern. The population structure and mating behaviour provided further support for protogyny. Size and age distributions by sex were bimodal, with males larger and older than females and sex ratios biased towards females. Mating groups consisted of a large male and several smaller females, and courtship occurred in pairs during the evening. Results on spawning periodicity and seasonality were incomplete, but histological data, monthly gonado-somatic indices (I(G)) and behavioural observations suggest that adults spawned around the full moon from May to September. Certain aspects of their reproductive biology (e.g. protogyny and low egg production) indicate that C. panamensis is particularly vulnerable to fishing and would benefit from a management policy in Mexico.