Although both inhibitory and stimulatory actions of estradiol on swine granulosa cells have been described, the bases for these inconsistent effects are not clear. We have tested properties of ovarian follicles and in vitro culture conditions that result in consistently stimulatory effects of estradiol on progesterone biosynthesis. Stimulatory actions of estradiol (in contrast to inhibitory effects) were critically dependent upon the density of granulosa cells in culture and the size and maturational status of the parent Graafian follicles. Granulosa cells isolated from small, rather than medium or large sized, swine follicles exhibited the greatest peak response to estradiol, although half-maximally stimulatory concentrations (ED50) of estradiol were similar (mean, 81 ng/ml). Granulosa cells from atretic follicles also secreted increased quantities of progesterone in response to estradiol, but the ED50 for estrogen stimulation was significantly higher (ED50 = 322 ng/ml estradiol) than that of comparable healthy follicles (ED50 = 109 ng/ml). This estrogen-responsive system was used to test the mechanisms subserving estrogen's trophic actions on granulosa cells. Estradiol significantly enhanced the activity of 3 beta-hydroxysteroid dehydrogenase with consequently increased production of progesterone and 20 alpha-hydroxypregn-4-en-3-one. Estrogen also augmented functional cholesterol side-chain cleavage activity in a dose- and time-dependent fashion with a resultant increase in pregnenolone biosynthesis. Moreover, parallel observations documented concordant dose responses for the synthesis of all three major progestins by pig granulosa cells. The trophic actions of estrogen on the steroidogenic pathway were associated with enhanced hydrolysis of endogenous cholesteryl ester stores but were not significantly antagonized by inhibition of de novo cholesterol biosynthesis. We conclude that suitable follicle selection and appropriate in vitro culture conditions provide a consistently estrogen-responsive granulosa-cell system, in which estradiol modulates certain key aspects of progestin and cholesterol metabolism. These trophic actions of estrogen are likely to prepare granulosa cells for the increased rates of progesterone biosynthesis ultimately required by fully differentiated luteal cells.