The development of a normal ovary during foetal life is essential for the production and ovulation of a high-quality oocyte in adult life. Early in embryogenesis, the primordial germ cells (PGCs) migrate to and colonise the genital ridges. Once the PGCs reach the bipotential gonad, the absence of the sex-determining region on the Y chromosome (SRY) gene and the presence of female-specific genes ensure that the indifferent gonad takes the female pathway and an ovary forms. PGCs enter into meiosis, transform into oogonia and ultimately give rise to oocytes that are later surrounded by granulosa cells to form primordial follicles. Various genes and signals are implicated in germ and somatic cell development, leading to successful follicle formation and normal ovarian development. This review focuses on the differentiation events, cellular processes and molecular mechanisms essential for foetal ovarian development in the mice and humans. A better understanding of these early cellular and morphological events will facilitate further study into the regulation of oocyte development, manifestation of ovarian disease and basis of female infertility.