Two experiments were conducted to examine circulating concentrations of progesterone (P₄) in cows with ovarian follicular cysts (OFCs) and to relate differing levels of P₄ to subsequent follicular events. In experiment 1, peripheral concentrations of P₄ were determined in cows diagnosed with OFCs. Nonpregnant, lactating Holstein and Jersey cows (n = 32) were diagnosed as having OFCs by rectal palpation. Ovarian follicular cysts were then examined by transrectal ultrasonography to confirm the presence of OFCs (follicle diameter, ≥17 mm; absence of luteal tissue). At confirmation, a blood sample was collected for quantification of P₄. The concentration of P₄ at confirmation was classified as low (<0.1 ng/ml), intermediate (0.1–1.0 ng/ml), or high (1.0–2.0 ng/ml). More OFCs were associated with intermediate (66%) than with either low (28%) or high (6%) concentrations of P₄. In experiment 2, the fate of follicles (diameter, ≥10 mm) that formed in the presence of an OFC was determined and related to circulating concentrations of P₄ during follicular development. Follicles (n = 59) that formed in the presence of an OFC ovulated (n = 19), formed a cyst (n = 30), or underwent normal growth and regression (NGR; n = 10). Endogenous P₄ in the 7-day period during follicular development was classified as low (if P₄ dropped to <0.1 ng/ml for 1 day or longer), intermediate (if P₄ averaged between 0.1 and 1.0 ng/ml and never dropped to <0.1 ng/ml), or high (if P₄ averaged >1.0 ng/ml and never dropped to <0.1 ng/ml). In the presence of intermediate P₄, 75% of observed follicles formed cysts, compared with 10% that ovulated and 15% that experienced NGR. In the presence of low P₄, 53%, 41%, and 6% of follicles ovulated, formed a follicular cyst, or experienced NGR, respectively. Thus, an association between intermediate P₄ and the formation of OFCs was established.