A wealth of neuropharmacological data demonstrates that oxytocin (OT) actions in the mammalian forebrain support a wide variety of affiliative behaviors and repress aggressive behaviors. Based on that literature, it was expected that reproductive and affiliative behaviors would be vastly decreased and aggression markedly increased in OT gene knockout (OTKO) mice. The initial publications reporting the behaviors of these mice did not include such phenotypes. Here, we compared single-unit activities recorded from the ventromedial hypothalamus in tissue slices of male and female OTKO mice and their wild-type littermate to test two hypotheses about OT functional genomics. First, we proposed that in OTKO mice, a very similar 9-amino-acid neuropeptide, arginine vasopressin (a likely gene duplication product), can ‘cross over’ and compensate for the lack of OT. This hypothesis was confirmed in both males and females. Further, we proposed that because of the lifelong absence of OT in OTKO, OT receptors would be more sensitive to OT in the knockout animals. We tested this idea in males and found that it was correct. Thus, an answer to the ‘OTKO paradox’ is put forth, with implications for OT-sensitive behaviors in a variety of species.