This study was undertaken to determine the effect of melatonin on steroid hormone production by ovine granulosa and luteal cells in vitro. Granulosa and luteal cells from ovine ovaries were cultured for nine days either in D-MEM only or in the presence of melatonin (0.86, 8.6, 86 nmol/l), ovine luteinizing hormone (oLH, 2 micrograms/l) or a combination of both these hormones. Progesterone (P4) and estradiol 17 beta (E2) were determined by validated RIAs. Melatonin stimulation began at either day 1 or day 5 of culture. Melatonin (0.86 nmol/l) significantly increased (p < 0.001) progesterone secretion by granulosa cells both when administered alone and when administered in combination with oLH; the more marked response was observed in the latter case. When the stimulation began at day 5, at a more advanced degree of differentiation of the cells, higher levels of P4 were observed. Higher concentrations of melatonin did not further increase progesterone production. Melatonin alone did not have a significant effect on the production of estradiol 17 beta; neither did melatonin stimulate progesterone production in either long-term cultured luteal cells or in short-term (1-2 h) cultured luteal and granulosa cells. The results of this study document a direct effect of melatonin in stimulating granulosa cells to produce progesterone, a synergistic activity between melatonin and luteinizing hormone and a different ability of granulosa cells to secrete P4 depending on the degree of differentiation.