The differentiation of ovarian somatic cells into granulosa, interstitial, and thecal lineages, and the ovarian growth factor(s) potentially associated with the cytodifferentiation of granulosa cells during the perinatal period mere investigated using cell type-specific protein markers. Ovaries collected from prenatal (Days 12-15 of pregnancy) and postnatal (Days 1-30) female hamsters were processed for immunohistochemical localization of transforming growth factor (TGF) beta (TGF beta 1, beta 2, and beta 3). Plasma levels of FSH, LH, progesterone, and estradiol-17 beta were detected by RIA. Prenatal hamster ovaries contained numerous mitotic oocytes and a few somatic cells. Only a fraction of somatic cells expressed barely detectable TGF beta 2 activity. Plasma FSH levels were quite detectable on postnatal Day 1 and increased gradually to reach a peak on Day 25, whereas LH did not increase until Day 12 and reached a plateau by postnatal Day 20. On postnatal Day 1, TGF beta 2 immunoreactivity was localized only in certain felts closely apposed to primordial oocytes. On postnatal Day 4, flattened, TGF beta 2-positive cells encircled individual oocytes, forming the very first cohort of primordial follicles. By Days 7 and 8, primary and early secondary follicles with intense TGF beta 2-positive cuboidal granulosa cells appeared. Subsequently, in large preantral follicles TGF beta 2 was expressed only in mural granulosa cells. On Day 13, TGF beta 1 and beta 2 immunoreactivities appeared for the first time in the interstitial cells. TGF beta 1 was localized in cells closely apposed to follicles, but TGF beta 2 activity was restricted to scattered cell clusters. Subsequently, the entire interstitium was positive for TGF beta 1 protein. These results suggest that differentiation of somatic cells into granulosa cells is the first event in ovarian morphogenesis; once the finite number of granulosa cells is selected, the residual cells differentiate into interstitium. Whether ovarian TGF beta 2 and TGF beta 1 are physiologically important in granulosa and interstitial cell differentiation needs further evaluation.