Follistatin is a transcriptional target and a modulator of activin action. Through an autocrine/paracrine loop, activin controls follistatin levels and thus regulates its own bioavailability. In gonadotropic alphaT3-1 cells, activin induces follistatin transcription primarily through the action of Smad3 at an intronic Smad-binding element (SBE1). Using a proteomics approach, we searched for endogenous alphaT3-1 proteins that participate in SBE1-mediated transcription. We identified FoxL2, a member of the forkhead family, as a candidate modulator of SBE1 function. Mutations of FoxL2 are associated with the blepharophimosis/ptosis/epicanthus inversus syndrome characterized with craniofacial defects and premature ovarian failure. FoxL2 localizes to alpha-glycoprotein subunit- and follicle-stimulating hormone beta-positive cells of the adult mouse pituitary and is present in alphaT3-1 and LbetaT2 cells, but its pituitary actions remain largely unknown. We have determined that FoxL2 binds to a forkhead-binding element (FKHB) located just downstream of the SBE1 site of the follistatin gene and functions as a Smad3 partner to drive SBE1-mediated transcription in alphaT3-1 cells treated with activin. Chromatin immunoprecipitation assays confirm that endogenous FoxL2 and Smad3 are recruited to the intronic enhancer of the follistatin gene where the SBE1 and FKHB sites are located. Exogenous FoxL2 enhances SBE1-mediated transcription, and short hairpin RNA-mediated knockdown of endogenous FoxL2 protein compromises this effect in alphaT3-1 cells. FoxL2 directly associates with Smad3 but not Smad2 or Smad4. This association between Smad3 and FoxL2 is mediated by the MH2 domain of Smad3 and is dependent on an intact forkhead domain in FoxL2. Altogether, these observations highlight a novel role for FoxL2 and suggest that it may function as a transcriptional regulator and a coordinator of Smad3 targets.