Intrafollicular factors play an important role in folliculogenesis. The follicle-stimulating hormone (FSH)-binding inhibitor (FSHBI), purified by our laboratory from human ovarian follicular fluid, has been shown to suppress ovulation and induce follicular atresia/apoptosis in mice as well as impair fertility in marmosets, the new world monkeys. The octapeptide, a peptide corresponding to the N-terminal region of human FSHBI (hFSHBI), has been synthesized and also shows FSHBI activity in vitro. In the present study, we have attempted to identify the mechanism of action of the peptide in granulosa cell cultures. Rat granulosa cell cultures were treated with varying concentrations of the octapeptide or partially purified hFSHBI (gel chromatography fraction hGF2) in the presence or absence of human FSH (hFSH) and the amount of progesterone (P4) secreted in the culture supernatants after 3 h/48 h was estimated. Both hGF2 and the octapeptide failed to alter basal levels as well as 8-bromo cAMP-induced P4 production, while FSH-induced P4 secretion was inhibited in a dose-dependent manner. These studies reveal that the octapeptide, a fragment of FSHBI, and the native protein have similar activity in vitro and both compounds alter FSH action at the receptor level upstream of cAMP formation.