Granulosa cell steroidogenesis has been reported to be modulated by transforming growth factor-alpha (TGF alpha) and its biochemical and physiological analog, epidermal growth factor (EGF). In this report, we studied whether TGF alpha or EGF mRNA is produced by granulosa cells, examined the morphological effects of TGF alpha or EGF on granulosa cell cultures, and measured the changes in granulosa cell progesterone production in cells cultured with TGF alpha or EGF. RNA from fresh granulosa cells and from those incubated overnight and for 4, 7, and 10 days with FSH was studied with reverse transcription-polymerase chain reaction for TGF alpha and for EGF. Only TGF alpha mRNA appeared to be present in the granulosa cells. Phase-contrast microscopy revealed that the combination of FSH plus TGF alpha or EGF resulted in cell shape changes and an increase in lipid droplets in the granulosa cells. Electron microscopy revealed that the endoplasmic reticulum increased in the granulosa cells incubated with either EGF or FSH plus EGF. Mitochondria of granulosa cells incubated with growth factors possessed ultrastructural features consistent with those found in preovulatory granulosa cells. Culture of the granulosa cells with FSH plus TGF alpha or with FSH plus EGF resulted in significantly elevated progesterone and 20 alpha-hydroxyprogesterone levels. The highest level of progesterone production was on the eighth day of culture. We conclude that TGF alpha mRNA is produced by granulosa cells and that granulosa cell differentiation, as defined by morphological and biochemical criteria, is significantly stimulated in vitro by the combination of FSH and TGF alpha.