Stem cell factor (SCF) is essential for the development of primordial follicles. By using cultured ovaries from neonatal rats, the effect of SCF on early follicular development was investigated. Steroidogenesis is a hallmark of follicular development. Expressions of three key protein factors in steroidogenesis, SF-1, StAR, and P450arom, were investigated using immunohistochemistry and in situ hybridization. SF-1 and StAR proteins were expressed in all ovarian cells. P450arom mRNA was localized exclusively in oocytes implying that estrogen might be synthesized by oocytes at this stage. SCF up-regulated the mRNA and protein expression of these proteins, suggesting SCF might promote the production of estrogen during this period of time. To study the differentiation status of follicular cells, the expression of FSHR and its response to SCF treatment was examined by using semi-quantitative RT-PCR. The results showed that SCF inhibited the expression of FSHR mRNA. It was also observed that SCF stimulated the expression of basic fibroblast growth factor (bFGF) in oocytes. Inactivation of bFGF by its neutralizing antibody resulted in a reversal of the inhibitory effect of SCF on the expression of FSHR. Therefore, the FSHR inhibitory effect of SCF could be mediated by bFGF. In summary, it seems that, at the early stages of follicular development, SCF might stimulate oocytes to produce estrogen while it inhibits the differentiation of granulosa cells that are the major sources of estrogen at the late stages of follicular development.