We have previously shown that basic fibroblast growth factor (bFGF) inhibits the FSH-induced differentiation of cultured rat granulosa cells, as manifested by prominent reduction of the LH receptor expression. We now investigate the possible sites and mechanism of action of bFGF. Whereas bFGF decreased the cAMP formation induced by FSH, it enhanced the cAMP production caused by cholera toxin and forskolin, suggesting that bFGF exerted its inhibitory action on cell differentiation at a step to cAMP production. Photoaffinity labeling with 8-azido-[32P]cAMP revealed that bFGF markedly reduced the FSH-induced increase in the level of regulatory subunit RII beta of the cAMP-dependent protein kinase (PKA) type II. In contrast to its striking effect on RII beta expression (70-80% inhibition), bFGF decreased PKA enzymatic activity by only 30%. On the other hand, transforming growth factor-beta (TGF beta) slightly amplified the stimulatory action of FSH and antagonized the bFGF inhibitory effect on both LH receptor expression and RII beta synthesis. We report that the protein kinase C (PKC) activator 12-O-tetradecanoylphorbol-13-acetate (TPA), which impaired granulosa cell differentiation, also abolished the RII beta synthesis induced by FSH. The activation of PKC by bFGF in granulosa cells was supported by the following findings: (i) bFGF markedly enhanced the production of diacylglycerol (2.3-fold stimulation at 5 min), the intracellular activator of PKC; (ii) bFGF promoted tight association of PKC to cellular membranes, a process that is believed to correlate with the enzyme activation; (iii) bFGF induced the phosphorylation of an endogenous M(r) 78,000/pI 4.7 protein that appears as a specific PKC substrate; (iv) bFGF mimicked the TPA-induced transmodulation of the epidermal growth factor (EGF) receptor, reducing by 36% the 125I-EGF binding on granulosa cells. We conclude that bFGF may exert its repressive action on RII beta synthesis, PKA activity, and granulosa cell differentiation by primarily targeting PKC activation.