Follistatin (FS) is an important physiological regulator of activin and other TGFbeta superfamily members. The recently discovered follistatin-like 3 (FSTL3; a.k.a. FLRG; FSRP) shares significant structural and functional homology with FS, but also has some interesting differences, including a prominent nuclear localization. The existence of these two related proteins allows detailed molecular and biochemical comparisons of the biologic roles of their individual structural elements. Current studies indicate that the heparin binding sequence is essential for the ability of FS to inhibit autocrine activin but is not sufficient to confer this activity on FSTL3. Preliminary analysis of FSTL3 transgenic mice suggests that FSTL3 regulates gonadal development and function through inhibition of the paracrine activity of activin and/or other related factors. These studies have identified important structural elements necessary for biological activity of FS and FSTL3 and potential roles for FSTL3 in vivo.