WT1, a gene deleted in some Wilms' tumors, encodes a transcription factor with zinc fingers and shares homology with proteins in the early growth response gene family. Although defects in the WT1 gene are associated with nephroblastoma and genitourinary malformation, the specific function of WT1 in the gonads remains unclear. We investigated the expression of WT1 transcripts in rat ovary during follicle development by Northern blotting, RNase protection assay, and in situ hybridization. Abundant WT1 transcripts were found in the ovary, testis, uterus, and kidney, with lower levels in the heart and pancreas. Treatment with estrogen or gonadotropins did not affect the concentration of ovarian WT1 mRNA. In situ hybridization analysis indicated that ovarian WT1 mRNA is expressed exclusively in the surface epithelium and granulosa cells of primordial, primary, and secondary follicles, and its levels decrease during follicle growth. Although RNase protection assay suggested the presence of four alternatively spliced forms of WT1 mRNA, the ratio of these transcripts remains constant during ovarian growth. Developmental changes in the expression of two granulosa cell differentiation marker genes, inhibin-alpha and FSH receptor, were found to be inversely correlated with WT1 levels. Because potential WT1-binding sites were found in the promoter of inhibin-alpha gene, we further tested whether WT1 might regulate the expression of this gene. Cotransfection of a WT1 expression vector with a promoter reporter plasmid of inhibin-alpha resulted in the repression of promoter activities in CHO cells in a dose-dependent manner. These results suggest that WT1 is expressed in high levels in granulosa cells of primordial, primary, and secondary follicles but decreases with follicle development. This transcription factor might be a repressor of ovarian differentiation genes in the granulosa cells and play a role in arresting the differentiation of immature follicles.