Inhibin and activin are members of the TGFbeta family that perform mutually antagonistic signaling roles in the anterior pituitary, gonads, and adrenal gland. Unopposed activin signaling in inhibin-null (Inha-/-) mice causes the formation of granulosa cell tumors in the gonads and adrenal cortex, which depend upon FSH for efficient growth and progression. In this study, we demonstrate that Smad3, a key effector of activin signaling, is expressed at high levels and is constitutively activated in tumors from these mice. Removal of Smad3 from Inha-/- mice by a genetic cross to Smad3-null (Madh3-/-) mice leads to a significant decrease in cyclinD2 expression and a significant attenuation of tumor progression in the gonads and adrenal. The decrease in cyclinD2 levels in compound knockout mice is related to a reduction in mitogenic signaling through the phosphoinositide-3-kinase (PI3-kinase)/Akt pathway, which is required for normal cell cycle progression in tumor cells. Loss of PI3-kinase/Akt signaling cannot be attributed to alterations in IGF expression, suggesting instead that signaling through the FSH receptor is attenuated. Gene expression profiling in the ovaries of Madh3-/- and Inha-/-:Madh3-/- compound knockout mice supports this hypothesis and further suggests that Smad3 is specifically required for FSH to activate PI3-kinase/Akt, but not protein kinase A. Together these observations imply that activin/Smad3 signaling is necessary for efficient signaling by FSH in Inha-/- tumor cells and that interruption of this pathway uncouples FSH from its intracellular mitogenic effectors.