The extent of FSH-mediated LH/hCG receptor induction and of basal and FSH-stimulated progesterone production by porcine granulosa cells in vitro, in serum-containing medium, is directly related to the plating density. Relative to pre-culture levels, low- and high-density cultures of cells routinely exhibited 1-2- and 10-11-fold increases in [125I]iodo-hCG binding, respectively. Monolayer growth, i.e. cell division, as measured by increases in cell protein or DNA content, was inversely related to plating density. This density-directed inverse relationship between growth and differentiation did not appear to be coupled under the conditions utilized. Whereas monolayer growth was dependent upon the cell surface density, i.e. the number of cells per unit surface area, differentiation was dependent upon cell concentration, i.e. cells per unit volume of medium. Cells plated at low density in medium containing 10% serum exhibited 50% less [125I]iodo-hCG binding than cells in 5% serum (P less than 0.025). Conversely, cells plated at high density exhibited a 14% increase (P less than 0.025) in binding at the higher serum level. Thus, it appears that the extent of differentiation depends upon the capacity of cells to neutralize serum inhibition which in turn is dependent upon the cell concentration. Serum neutralization by granulosa cells is an FSH-dependent process. Conditioned medium derived from insulin-treated, high-density cultures did not facilitate optimum LH/hCG receptor induction in low-density cultures. Conditioned medium from cultures treated with insulin plus FSH, however, facilitated LH/hCG receptor induction in low-density cultures to the same extent as obtained in high-density cultures. The enhancement by FSH-conditioned medium cannot be attributed to residual FSH or to dilution of serum components during the preparation of the conditioned medium. The phenomena of serum-attenuated granulosa cell differentiation in vitro, and of a density-dependent reversal of this process, may have regulatory implications in vivo since follicular fluid contains many serum components and since the granulosa cell complement is an important determinant of follicle maturation.