Background: Aberrant signaling between germ cells and somatic cells can lead to reproductive disease and depends on diffusible signals, including TGFB-family proteins. The TGFB-family protein Gsdf (gonadal soma derived factor) controls sex determination in some fish and is a candidate for mediating germ cell/soma signaling. Results: Zebrafish expressed gsdf in somatic cells of bipotential gonads and expression continued in ovarian granulosa cells and testicular Sertoli cells. Homozygous gsdf knockout mutants delayed leaving the bipotential gonad state, but then became a male or a female. Mutant females ovulated a few oocytes, then became sterile, accumulating immature follicles. Female mutants stored excess lipid and down-regulated aromatase, gata4, insulin receptor, estrogen receptor, and genes for lipid metabolism, vitellogenin, and steroid biosynthesis. Mutant females contained less estrogen and more androgen than wild types. Mutant males were fertile. Genomic analysis suggests that Gsdf, Bmp15, and Gdf9, originated as paralogs in vertebrate genome duplication events. Conclusions: In zebrafish, gsdf regulates ovarian follicle maturation and expression of genes for steroid biosynthesis, obesity, diabetes, and female fertility, leading to ovarian and extra-ovarian phenotypes that mimic human polycystic ovarian syndrome (PCOS), suggesting a role for a related TGFB signaling molecule in the etiology of PCOS.