Peroxisome proliferator-activated receptor (PPARγ) is a nuclear receptor that is activated by fatty acids and derivatives and the antidiabetic glitazones, which plays a role in the control of lipid and glucose homeostasis. In the present work, we tested the hypothesis that PPARγ plays a role in reproductive tissues by studying its expression and function in the hypothalamo-pituitary-ovary axis in the sheep. PPARγ 1 and PPARγ 2 proteins and mRNAs were detected in whole ovine pituitary and ovary but not in hypothalamic extracts. In situ hybridization on ovarian section localized PPARγ mRNA in the granulosa layer of follicles. Interestingly, PPARγ expression was higher in small antral (1–3 mm diameter) than in preovulatory follicles (>5 mm diameter) (P < 0.001) and was not correlated with healthy status. To assess the biological activity of ovarian PPARγ, ovine granulosa cells were transfected with a reporter construct driven by PPARγ-responsive elements. Addition of rosiglitazone, a PPARγ ligand, stimulated reporter gene expression, showing that endogenous PPARγ is functional in ovine granulosa cells in vitro. Moreover, rosiglitazone inhibited granulosa cell proliferation (P < 0.05) and increased the secretion of progesterone in vitro (P < 0.05). This stimulation effect was stronger in granulosa cells from small than from large follicles. In contrast, rosiglitazone had no effect on LH, FSH, prolactin and growth hormone secretion by ovine pituitary cells in vitro. Overall, these data suggest that PPARγ ligands might stimulate follicular differentiation in vivo likely through a direct action on granulosa cells rather than by modulating pituitary hormone secretion.