Mouse oocytes secrete a factor(s) that inhibits progesterone and enhances estradiol production by granulosa cells. This study determined the ability of mouse oocytes to secrete this steroid-regulating factor during oocyte growth and the ability of granulosa cells to respond to the factor during follicular development. Oocyte-granulosa cell complexes from preantral and antral follicles were oocytectomized (OOX; oocytes microsurgically removed) and cultured for up to 48 h with FSH (150 ng/ml) and testosterone (500 nM). At all stages of development examined, OOX complexes produced more progesterone than did intact complexes, from 1.45-fold for early growing follicles to 23-fold for complexes from antral follicles. Significant estradiol production was restricted to intact complexes from late antral follicles. Progesterone accumulation by OOX complexes cocultured with oocytes was inhibited by all stages of oocytes examined, with maximal inhibition by fully grown oocytes. Ovulated complexes produced large quantities of progesterone, even though oocytes secreted progesterone-inhibitory factor, because of a desensitization of cumulus cells to the factor during their terminal differentiation. Even in the presence of abundant pregnenolone, OOX complexes showed reduced ability to produce and/or accumulate progesterone in the presence of oocytes, suggesting that the oocyte-secreted factor, either directly or indirectly, regulates the activity of 3beta-hydroxysteroid dehydrogenase and/or progesterone metabolism. These results demonstrate that oocytes secrete a factor with steroid-regulating activity in increasing amounts and/or potency during follicular development, but responsiveness of cumulus cells to this factor declines during luteinization.