In the present study, we investigated the cellular mechanism by which oocytes and bone morphogenetic proteins (BMPs) govern FSH-induced steroidogenesis using rat primary granulosa cells. BMP-6 and BMP-7 both inhibited FSH- and forskolin (FSK)-induced progesterone synthesis and reduced cAMP synthesis independent of the presence or absence of oocytes. BMP-7 also increased FSH-induced estradiol production, and the response was further augmented in the presence of oocytes. In contrast, BMP-6 had no impact on estradiol synthesis regardless of the presence of oocytes. Because BMP-7 changed neither FSK- nor cAMP-induced estradiol production, the BMP-7 action was mediated through a FSH receptor signaling mechanism that was independent of cAMP-protein kinase A pathway. Treatment with FSH but not cAMP activated ERK1/2 phosphorylation in granulosa cells, which was further accelerated by oocytes. A specific ERK inhibitor, U0126, increased estradiol production and decreased FSH- and FSK-induced progesterone production and cAMP synthesis. This suggests that ERK activation is directly linked to inhibition of estradiol synthesis and amplification of cAMP. Moreover, FSH- induced ERK1/2 phosphorylation was inhibited by BMP-7 but not influenced by BMP-6. In contrast, BMP signaling including Smad1/5/8 phosphorylation and Id-1 transcription was up-regulated by FSH and oocytes in granulosa cells through inhibition of Smad6/7 expression. Collectively, oocytes enhance FSH- induced MAPK activation and BMP signaling in granulosa cells, which leads to differential regulation of steroidogenesis elicited by BMPs in the presence of FSH in developing follicles.