The localization of epidermal growth factor (EGF) in the ovary and its effect on proliferation of granulosa cells were investigated in gonadotrophin-primed immature female rats. Immunoreactions with anti-rat EGF monoclonal antibody were observed sparsely in the granulosa layer and antrum of follicles, but not in the theca layer or stromal tissue. The EGF-positive cells were round or oval shaped and often larger than granulosa cells. The localization and morphological appearances of these cells in the follicles were in good agreement with those of macrophages. Although EGF alone did not promote granulosa cell growth in vitro, the labelling index with [3H]thymidine of granulosa cells cultured with 0.1ng/ml EGF and 0.1ng/ml basic fibroblast growth factor was significantly greater than that without the growth factors (18.4% vs. 15.8%, P<0.01). These results suggest that macrophages in follicles may modulate follicular development through a paracrine mechanism by secreting EGF and other growth factors.