Premature ovarian failure in a subgroup of women with blepharophimosis-ptosis-epicanthus inversus type 1 syndrome has been associated with nonsense mutations in the gene encoding a Forkhead transcription factor, Forkhead L2 (FOXL2). However, the exact function of FOXL2 in the ovary is unclear. We investigated the expression of FOXL2 in the mouse ovary during follicular development and maturation by RT-PCR and in situ hybridization. The FOXL2 mRNA is expressed in ovaries throughout development and adulthood and is localized to the undifferentiated granulosa cells in small and medium follicles as well as cumulus cells of preovulatory follicles. FOXL2 belongs to a group of transcription factors capable of interacting with specific DNA sequences in diverse gene promoters. With the presence of multiple putative forkhead DNA consensus sites, the promoter of the human steroidogenic acute regulatory (StAR) gene was used to test for regulation by FOXL2. Cotransfection studies revealed that wild-type FOXL2 represses the activity of the StAR promoter, and the first 95 bp upstream of the transcriptional start site of the StAR gene is sufficient for FOXL2 repression. EMSAs confirmed that FOXL2 interacts directly with this region. Analyses using FOXL2 mutants also demonstrated the importance of the entire alanine/proline-rich carboxyl terminus of FOXL2 for transcriptional repression. Furthermore, these mutations produce a protein with a dominant-negative effect that disables the transcriptional repressor activity of wild-type FOXL2. Dominant-negative mutations of FOXL2 could increase expression of StAR and other follicle differentiation genes in small and medium follicles to accelerate follicle development, resulting in increased initial recruitment of dormant follicles and thus the premature ovarian failure phenotype.