Very small embryonic-like (VSELs) and ovarian (OSCs) stem cellsare located in adult mammalian ovary surface epithelium (OSE). OSCs can expand long-term and differentiate into oocyte-like structures in vitro and have resulted in birth of fertile pups. Lineage tracing studies have provided evidence to suggest OSCs differentiation into oocytes in vivo. But how these stem cells function under normal physiological conditions has not yet been well worked out. Besides studying STRA-8 and SCP-3 expression in enzymatically isolated OSE cells smears, mice were injected BrdU to track mitosis, meiosis and follicle assembly. H&E stained OSE cells during late diestrus and proestrus showed VSELs undergoing asymmetrical cell divisions to give rise to slightly bigger OSCs which in turn underwent symmetrical cell divisions followed by clonal expansion (rapid expansion with incomplete cytokinesis) during early estrus to form germ cell nests (GCN). OCT-4, SSEA-1, MVH and DAZL positive cells in GCN expressed Erα, Erβ and FSHR, were interconnected by ring canals (TEX-14), showed mitochondrial aggregation (Cytochrome C) and Balbiani Body (TRAL). Apoptosis in 'nurse' cells was marked by PARP and putative oocytes were clearly visualized. BrdU was detected in cells undergoing mitosis/meiosis and also in an oocyte of secondary follicle. FACS sorted, green fluorescent protein (GFP) positive VSELs upon transplantation resulted in GFP positive GCN suggesting crucial role for VSELs in adult ovaries. Results suggest that various events described during oogenesis and follicle assembly in fetal ovaries are recapitulated on regular basis in adult ovary and result in the formation of follicles.