Follicle-stimulating hormone (FSH) is the major regulator of folliculogenesis, but other factors modulate its action, including members of the transforming growth factor (TGF) beta family. The intersection of signal transduction pathways that integrate the follicular response to FSH remains to be elucidated. Herein, we investigated the role of Smad3, a critical molecule mediating the intracellular TGFbeta family proteins, in follicle development and the expression of FSH receptors. We found that gonadotropin stimulation could not induce normal ovulation in Smad3-deficient mice. Moreover, FSH could not stimulate early follicle growth in Smad3-deficient mice in in vivo or in vitro systems. Cultured granulosa cells from Smad3-deficient animals had reduced cell division rates following FSH treatment compared with granulosa cells derived from the ovaries of wild-type (WT) mice. Whole ovaries and isolated granulosa cells from Smad3-deficient animals had lower basal expression of FSH receptor (Fshr), aromatase (Cyp19a1), and cyclin D2 (Ccnd2) mRNA compared with WT mice. Follicle-stimulating hormone treatment of granulosa cells from WT ovaries upregulated Fshr, Cyp19a1, and Ccnd2 expression. However, FSH did not increase these mRNAs in Smad3-deficient granulosa cells. When Smad3 was introduced into Smad3-deficient granulosa cells with adenovirus vectors, FSH responsiveness was restored, and FSH was able to upregulate Fshr expression. Furthermore, SMAD3 interacts with a palindromic SMAD binding element in the Fshr promoter, and TGFB can activate promoter constructs containing this element. Collectively, these observations establish an essential role for Smad3 in regulating the response of ovarian follicles to FSH.