Isolated luteal cells, prepared from superovulated rat ovaries by digestion with collagenase, were subjected to density-gradient centrifugation on Percoll to give a more highly purified preparation of luteal cells than has been reported previously. The cells formed progesterone when incubated in vitro; lutropin stimulated this steroidogenesis. Progesterone formation was linear for at least 2 h; a minimal lutropin concentration of 1.0 ng/ml was needed for stimulation and concentrations of 3.0 and 100 ng/ml gave half-maximal and maximal responses respectively. The cells were unresponsive towards hormones other than lutropin. Exposure to lutropin raised the cellular cyclic AMP concentration, and dibutyryl cyclic AMP, but not dibutyryl cyclic GMP, was as effective in stimulating steroidogenesis as was lutropin. Aminoglutethimide, an inhibitor of cholesterol side-chain cleavage, completely blocked progesterone formation by the cells, showing cholesterol side-chain cleavage to be an obligatory step in steroidogenesis by these cells. Neither the activity of 3-hydroxy-3-methylglutaryl-CoA reductase nor the incorporation of radioactively labelled acetate or mevalonate into cholesterol by cells incubated in vitro were detectable unless the rats had been treated previously with 4-aminopyrazolo[3,4-d]pyrimidine. In cells from rats so treated, compactin was found to block almost completely the incorporation of radioactively labelled acetate, but not of mevalonate, into cholesterol, indicating that this inhibitor acts in corpus luteum in the same way as it does in other tissues. In cells from rats not treated with 4-aminopyrazolo[3,4-d]pyrimidine compactin had no effect on progesterone formation in vitro, showing cholesterol biosynthesis to be unnecessary for the rapid steroidogenic response by luteal cells to lutropin.