Primordial follicle assembly is essential for reproduction in mammalian females. Oocytes develop in germ cell cysts that in late fetal development begin break down into individual oocytes and become surrounded by pregranulosa cells, forming primordial follicles. As they separate, many oocytes are lost by apoptosis. Exposure to steroid hormones delays cyst breakdown, follicle formation, and associated oocyte loss in some species. One model for regulation of follicle formation is that steroid hormones in the maternal circulation keep cells in cysts and prevent oocyte death during fetal development but that late in pregnancy hormone levels drop, triggering cyst breakdown and associated oocyte loss. However, herein we found that, while maternal circulating levels of progesterone drop during late fetal development, maternal estradiol levels remain high. We hypothesized that fetal ovaries were the source of hormones and that late in fetal development their production stops. To test this, mRNA and protein levels of steroidogenic enzymes required for estradiol and progesterone synthesis were measured. We found that aromatase and 3-beta-hydroxysteroid dehydrogenase mRNA levels drop before cyst breakdown. The 3-beta-hydroxysteroid dehydrogenase protein levels also dropped, but we did not detect a change in aromatase protein levels. The steroid content of perinatal ovaries was assayed, and both estradiol and progesterone were detected in fetal ovaries before cyst breakdown. To determine the role of steroid hormones in oocyte development, we examined the effects of blocking steroid hormone production in organ culture and found that the number of oocytes was reduced, supporting our model that steroid hormones are important for fetal oocyte survival.