Abstract: A stern drive unit for incorporation in the drive leg of a stern drive or outboard drive of a watercraft comprises an intermediate drive shaft (8) mounted for axial translatory movement within an outer housing (1) and splined at its upper end for driven engagement with an input drive shaft (23) of the stern or output drive. The intermediate shaft (8) carries upper and lower gears (9, 10) that are rotatable relatively to the intermediate shaft (8) but can be coupled thereto by means of friction clutches recessed within the respective gears. The intermediate shaft (8) can be driven axially relatively to the housing (1) in each of two directions by means of a hydraulic piston and cylinder arrangement (26-33). A collar (15) fixed with respect to the intermediate drive shaft (8) is arranged to actuate the respective friction clutches in each direction of translatory motion whereby the intermediate shaft (8) can be directly coupled either to the gear (9) or the gear (10).