Ovarian germ cell survival is dependent upon the formation of primordial follicles, which occurs during fetal life in the human. Activin contributes to germ cell proliferation and survival at this time. SMADs2 and 3 are central elements in the activin signalling pathway and thus indicate sites of activin action. We have investigated the expression and localisation of SMADs2 and 3 in the fetal ovary between 14 and 20 weeks gestation, i.e. preceding and during primordial follicle formation. SMAD3 mRNA expression increased 1.9 fold (P=0.02). SMAD2 and 3 proteins were localised by immunofluorescence to the nuclei of three distinct populations of somatic cells: (a) stromal cells between clusters of germ cells; (b) some somatic cells intermingled with activin beta A-expressing germ cells; (c) pre-granulosa cells surrounding primordial follicles. Germ cells did not express SMAD2 or 3. Activin A increased and follistatin decreased phosphorylation of SMAD2/3 in vitro, and activin increased SMAD2 and decreased KITLG mRNA expression. It therefore appears that somatic cells are the targets for activin signalling in the developing ovary. The effects of activin on germ cells are indirect and include mediation by the kit ligand/c-Kit pathway, rather than being an autocrine germ cell effect.