Inhibin and activin are members of the TGF family, which perform mutually antagonistic signaling roles in the anterior pituitary, gonads and adrenal gland. Unopposed activin signaling in inhibin-null (Inha-/-) mice causes the formation of granulosa cell tumors in the gonads and adrenal cortex, which depend upon follicle stimulating hormone (FSH) for efficient growth and progression. In this study we demonstrate that Smad3, a key effector of activin signaling, is expressed at high levels and is constitutively activated in tumors from these mice. Removal of Smad3 from Inha-/- mice by a genetic cross to Smad3-null (Madh3-/-) mice leads to a significant decrease in cyclinD2 expression and a significant attenuation of tumor progression in the gonads and adrenal. The decrease in cyclinD2 levels in compound knockout mice is related to a reduction in mitogenic signaling through the PI3-kinase/Akt pathway, which is required for normal cell cycle progression in tumor cells. Loss of PI3-kinase/Akt signaling cannot be attributed to alterations in insulin-like growth factor expression, suggesting instead that signaling through the FSH receptor is attenuated. Gene expression profiling in the ovaries of Madh3-/- and Inha-/-:Madh3-/- compound knockout mice supports this hypothesis, and further suggests that Smad3 is specifically required for FSH to activate PI3K/Akt, but not protein kinase A (PKA). Together these observations imply that activin/Smad3 signaling is necessary for efficient signaling by FSH in Inha-/- tumor cells, and that interruption of this pathway uncouples FSH from its intracellular mitogenic effectors.