We previously reported that human follicular fluid contained a protein that inhibits binding of 125I-human FSH to its membrane receptor (FSH-BI) and demonstrates FSH-like agonist activity in vitro. The cellular origin of FSH-BI was unknown, although ovarian granulosa cells seemed a likely source. To address this question, human granulosa cells were collected from patients during routine in-vitro fertilization (IVF) or gamete intra-Fallopian transfer (GIFT) procedures. Cells from 98 patients were cultured and then examined for their ability to secrete FSH receptor-binding inhibitory activity into the culture medium. The function of the cultured cells was confirmed by their ability to respond to added FSH with conversion of exogenous androstenedione to oestradiol. Radioreceptor assays were performed individually on cell culture medium obtained from granulosa cell cultures from these 98 patients. Cultured granulosa cells, under basal conditions (in the absence of FSH stimulation), secreted significant FSH-BI activity into the culture medium. In order to accumulate enough material for further study, this culture medium was pooled and lyophilized. The lyophilized medium retained FSH-BI activity, and also demonstrated FSH agonist activity by stimulating oestradiol synthesis in cultured rat Sertoli cells. A fraction showing a single component after purification by polyacrylamide gel electrophoresis had an estimated molecular weight of 25000, and inhibited 125I-human FSH binding to receptor by 50% at 2.5 microg/ml. The results indicate that human granulosa cells secrete a protein with FSH-like activity having potential significance as a local regulator of FSH action in the ovary.