Human Blepharophimosis/ptosis/epicanthus inversus syndrome (BPES) type I is an autosomal dominant disorder associated with premature ovarian failure (POF)caused by mutations in FOXL2, a winged-helix/forkhead domain transcription factor. Although it has been shown that FOXL2 is expressed in adult ovaries, its function during folliculogenesis is not known. Here, we show that the murine Foxl2 gene is essential for granulosa cell differentiation and ovary maintenance. In Foxl2lacZ homozygous mutant ovaries granulosa cells do not complete the squamous to cuboidal transition leading to the absence of secondary follicles and oocyte atresia. We further demonstrate that activin-βA and anti-Mullerian inhibiting hormone expression is absent or strongly diminished in Foxl2lacZ homozygous mutant ovaries. Unexpectedly, two weeks after birth most if not all oocytes expressed Gdf9 in Foxl2lacZ homozygous mutant ovaries, indicating that nearly all primordial follicles have already initiated folliculogenesis at this stage. This activation, in the absence of functional granulosa cells, leads to oocyte atresia and progressive follicular depletion. In addition to providing a molecular mechanism for premature ovarian failure in BPES, these results suggest that granulosa cell function is not only crucial for oocyte growth but also to maintain follicular quiescence in vivo.