The establishment of dominant ovarian follicles that are capable of ovulating fertilizable oocytes is a fundamental determinant of female fertility. This process is governed by pituitary gonadotropins as well as local ovarian factors. Within the follicle, estrogen acts in an autocrine/paracrine manner to enhance FSH action in the granulosa cells. These effects include the augmentation of P450aromatase expression and estradiol production. This feed-forward effect of estrogen is believed to play a key role in follicle dominance. Here we found the essential role of the oocyte in this physiological process using primary cultures of rat granulosa cells. In the presence, but not absence, of oocytes, estrogen amplified FSH-stimulated increases in mRNA expression of P450aromatase, FSH receptor, LH receptor, and inhibin alpha-, betaA-, and betaB-subunits as well as cAMP production. Thus, oocytes mediate the estrogen enhancement of FSH action in the granulosa cells. In comparison with FSH, cotreatment with estrogen and oocytes failed to amplify the stimulatory effects of forskolin or 8-bromoadenosine-cAMP on granulosa cell responses including P450aromatase mRNA expression and cAMP production, indicating that estrogen/oocytes amplify FSH action at a site upstream of adenylate cyclase. These findings support the novel conclusion that communication between the oocyte and granulosa cells plays a crucial role in mediating estrogen action during FSH-dependent folliculogenesis.