A new perspective on ovarian follicular development has emerged over the last decade. Whereas the oocyte was previously considered only a passive recipient of developmental signals from oocyte-associated granulosa cells, it is now clear that communication between oocytes and granulosa cells is bidirectional. A complex interplay of regulatory factors governs the development of both types of cell. This interplay is essential not only for oocyte development but also for follicular development, beginning with the initial assembly of the primordial follicle and continuing throughout ovulation. The existence of an oocyte-granulosa cell regulatory loop, essential for normal follicular differentiation as well as for the production of an oocyte competent to undergo fertilization and embryogenesis, is proposed. Although gonadotrophins are essential for driving the differentiation of granulosa cell phenotypes, within its sphere of influence, the oocyte is probably the dominant factor determining the direction of differentiation and the function of the granulosa cells associated with it.