Ten years ago, we reported that in adult human females the ovarian surface epithelium (OSE) is a source of germ cells. Recently, we also demonstrated that new primary follicles are formed by assembly of oocytes with nests of primitive granulosa cells in the ovarian cortex. The components of the new primary follicles, primitive granulosa and germ cells, differentiated sequentially from the OSE, which arises from cytokeratin positive mesenchymal progenitor cells residing in the ovarian tunica albuginea. In the present study, we investigated the possibility that the oocytes and granulosa cells may differentiate in cultures derived from adult human ovaries. Cells were scrapped from the surface of ovaries and cultured for 5 to 6 days, in the presence or absence of estrogenic stimuli [phenol red (PhR)]. The OSE cells cultured in the medium without PhR differentiated into small (15 micron) cells of granulosa phenotype, and epithelial, neural, and mesenchymal type cells. In contrast, OSE cells cultured in the presence of PhR differentiated directly into large (180 micron) cells of the oocyte phenotype. Such cells exhibited germinal vesicle breakdown, expulsion of the polar body, and surface expression of zona pellucida proteins, i.e. characteristics of secondary oocytes. These in vitro studies confirm our in vivo observations that in adult human ovaries, the OSE is a bipotent source of oocytes and granulosa cells. Development of numerous mature oocytes from adult ovarian stem cells in vitro offers new strategies for the egg preservation, IVF utilization, and treatment of female infertility. In addition, other clinical applications aiming to utilize stem cells, and basic stem cell research as well, may employ totipotent embryonic stem cells developing from fertilized oocytes.