Maintenance and activation of the limited supply of primordial follicles in the ovary are important determinants of reproductive lifespan. Currently, the molecular programme that maintains the primordial phenotype and the early events associated with follicle activation are not well defined. Here, we have systematically analysed these events using microscopy and detailed image analysis. Using the immature mouse ovary as a model, we demonstrate that the onset of granulosa cell (GC) proliferation results in increased packing density on the oocyte surface and consequent GC cuboidalization. These events precede oocyte growth and nuclear translocation of FOXO3a, a transcription factor important in follicle activation. Immunolabelling of the TGFβ signalling mediators and transcription factors SMAD2/3 revealed a striking expression pattern specific to GCs of small follicles. SMAD2/3 were expressed in the nuclei of primordial GCs but were mostly excluded in early growing follicles. In activated follicles, GC nuclei lacking SMAD2/3 generally expressed Ki67. These findings suggest that the first phenotypic changes during follicle activation are observed in GCs, and that TGFβ signalling is fundamental for regulating GC arrest and the onset of proliferation.