Sex chromosomes of eutherian mammals are highly different in size and gene content, and share only a small region of homology (pseudoautosomal region, PAR). They are thought to have evolved through an addition-attrition cycle involving the addition of autosomal segments to sex chromosomes and their subsequent differentiation. The events that drive this process are difficult to investigate because sex chromosomes in almost all mammals are at a very advanced stage of differentiation. Here, we have taken advantage of a recent translocation of an autosome to both sex chromosomes in the African pygmy mouse Mus minutoides, which has restored a large segment of homology (neo-PAR). By studying meiotic sex chromosome behavior and identifying fully sex-linked genetic markers in the neo-PAR, we demonstrate that this region shows unequivocal signs of early sex-differentiation. First, synapsis and resolution of DNA damage intermediates are delayed in the neo-PAR during meiosis. Second, recombination is suppressed or largely reduced in a large portion of the neo-PAR. However, the inactivation process that characterizes sex chromosomes during meiosis does not extend to this region. Finally, the sex chromosomes show a dual mechanism of association at metaphase-I that involves the formation of a chiasma in the neo-PAR and the preservation of an ancestral achiasmate mode of association in the non-homologous segments. We show that the study of meiosis is crucial to apprehend the onset of sex chromosome differentiation, as it introduces structural and functional constrains to sex chromosome evolution. Synapsis and DNA repair dynamics are the first processes affected in the incipient differentiation of X and Y chromosomes, and they may be involved in accelerating their evolution. This provides one of the very first reports of early steps in neo-sex chromosome differentiation in mammals, and for the first time a cellular framework for the addition-attrition model of sex chromosome evolution.