The proliferation and terminal differentiation of granulosa cells are critical for normal follicular growth, ovulation, and luteinization. Therefore, the in situ localization and hormonal regulation of cell cycle activators (cyclin D1, D2, and D3) and cell cycle inhibitors (p27(Kip1) and p21(Cip1)) were analyzed in ovaries of mice and rats at defined stages of follicular growth and differentiation. Cyclin D2 mRNA was specifically localized to granulosa cells of growing follicles, while cyclin D1 and cyclin D3 were restricted to theca cells. In hypophysectomized (H) rats, cyclin D2 mRNA and protein were increased in granulosa cells by treatment with estradiol or FSH and were increased maximally by treatment with both hormones. In serum-free cultures of rat granulosa cells, cyclin D2 mRNA was rapidly elevated in response to FSH, forskolin, and estradiol, indicating that estradiol as well as cAMP can act directly and independently to increase cyclin D2 expression. The levels of p27(Kip1) protein were not increased in response to estradiol or FSH. In contrast, when ovulatory doses of human CG (LH) were administered to hormonally primed H rats to stimulate luteinization, cyclin D2 mRNA and protein were rapidly decreased and undetectable within 4 h, specifically in granulosa cells of large follicles. Also in response to LH, the expression of the cell cycle inhibitor p27(Kip1) was induced between 12 and 24 h (p21(Cip1) was induced within 4 h) and remained elevated specifically in luteal tissue. A critical role for cyclin D2 in the hormone-dependent phase of follicular growth is illustrated by the ovarian follicles of cyclin D2(-/-) mice, which do not undergo rapid growth in response to hormones, but do express markers of FSH/LH action, cell cycle exit, and terminal differentiation. Collectively, these data indicate that FSH and estradiol regulate granulosa cell proliferation during the development of preovulatory follicles by increasing levels of cyclin D2 relative to p27(Kip1) and that LH terminates follicular growth by down-regulating cyclin D2 concurrent with up-regulation of p27(Kip1) and p21(Cip1).