Evidence to enhance the premise that inhibin and activin are local regulators of ovarian folliculogenesis is presented in this review. Granulosa cells (GC) have been identified as the source of inhibin/activin in the ovary on the basis of mRNA and protein localisation and the measurement of the inhibin forms in GC conditioned media. Expression of the subunit mRNAs changed with follicular development, being maximal in the ovaries of 8-day-old rats, where secondary follicles predominate. The expression of beta subunit mRNAs by GC isolated from diethylstilboestrol (DES)-treated immature rats, was reduced in the absence of any change in alpha subunit mRNA expression. Dimeric inhibin-A, -B and free alpha subunit were produced by ovarian cell cultures prepared from 4- to 12-day-old rats. Inhibin-A production by these cultures was responsive to FSH and TGF-beta, with preantral follicles of day 8 ovaries exerting effects so profound that the inhibin A/alpha subunit ratio increased, most likely due to a stimulation of beta(A) subunit production. In contrast, inhibin-B was not stimulated by TGF-beta until day 8 and FSH until day 12. Fractionation of GC conditioned media revealed a prominence of free alpha subunit and inhibin-A, but little inhibin-B, suggesting that inhibin-B production declines with follicular development. Activin receptor types I and II, Smads 1-8 and betaglycan (beta-glycan) mRNAs were present in the rat ovary and showed distinct patterns of expression between postnatal days 4 and 12. Oocytes and GC localised activin receptor, Smad and beta-glycan proteins, with beta-glycan also present in theca cells (TC). These data indicate that activin/TGF-beta signalling machinery and factors which influence these pathways, are present in the postnatal rat ovary. Our hypothesis that inhibin and activin play important and changing autocrine/paracrine roles in the growth and differentiation of follicles, including the oocyte, has been supported by these studies.