Insulin-like growth factor (IGF)-I and IGF-II, and their binding proteins (IGFBPs) have been demonstrated to play important roles in follicular development as intraovarian regulators. Previous studies have demonstrated that the follicular fluid of atretic follicles contains high levels of IGFBP-2 and IGFBP-4, which are known to inhibit the action of IGFs. In this study, we identified IGFBP-4 protease activity in the follicular fluid of developing but not atretic follicles. To elucidate the regulation mechanism of IGFBP-4 proteolytic activity in the ovary, cultured luteinized granulosa cells (GCs) were incubated with various hormones, and proteolyzed IGFBP-4 in the medium was analyzed. IGFBP-4 proteolytic activity was increased when GCs were incubated with IGFs, estradiol or follicle-stimulating hormone (FSH) but not with testosterone. We also showed that IGFBP-4 inhibited IGF-1-induced estradiol release by GCs while proteolyzed IGFBP-4 did not. These results suggest that human luteinized GCs produce IGFBP-4 protease, and that FSH and IGFs may stimulate folliculogenesis by modulating IGFBP-4 degradation in the ovary.