The nutritional status of a cow is a key factor in the regulation of both follicle growth and oocyte quality. In this study, the effect of diets designed to increase circulating insulin and insulin-like growth factor I (IGF-I) concentrations on steroid production by granulosa cells in vitro was examined to analyse the mechanisms through which these changes occur. Hereford x Friesian heifers (n = 24) were offered maintenance or twice maintenance diets during the experimental period (17 days). Circulating concentrations of FSH did not differ between the two dietary groups, whereas insulin and IGF-I concentrations showed significant diet x day of oestrous cycle interactions. Ovaries were collected on day 3 of the first follicle wave after synchronization of oestrus. Granulosa cells were isolated from small (1-4 mm) and medium-sized (4-8 mm) follicles and cultured in the presence of long R3-IGF-I or bFSH or both. After 4 days in culture, granulosa cells isolated from small follicles, but not medium-sized follicles, collected from cattle offered the twice maintenance diet secreted significantly higher (P < 0.05) amounts of oestradiol compared with granulosa cells collected from cattle offered the maintenance diet. The effect was apparent in either the presence or absence of FSH and long R3-IGF-I. This nutritional effect on aromatase activity in granulosa cells was not apparent after day 6 of culture. There was no effect of diet on progesterone production by granulosa cells after 4 or 6 days of culture. These results support the hypothesis that dietary-induced changes in circulating insulin and IGF-I concentrations have a direct effect on the steroidogenic potential of bovine granulosa cells from small follicles. The dietary-induced increases in aromatase activity in small follicles combined with the increased concentration of metabolic hormones are possible mechanisms through which short-term changes in nutrition may affect follicle dynamics.