The differentiation of primordial germ cells (PGCs) into functional oocytes is important for the continuation of species. In mammals, PGCs begin to differentiate into oocytes during embryonic development. Oocytes develop in clusters called germ line cysts. During fetal or neonatal development, germ cell cysts break apart into single oocytes that become surrounded by pregranulosa cells to form primordial follicles. During the process of cyst breakdown, a subset of cells in each cyst undergoes cell death with only one-third of the initial number of oocytes surviving to form primordial follicles. The mechanisms that control cyst breakdown, oocyte survival, and follicle assembly are currently under investigation. This review describes the mechanisms that have been implicated in the control of primordial follicle formation, which include programmed cell death regulation, growth factor and other signaling pathways, regulation by transcription factors and hormones, meiotic progression, and changes in cell adhesion. Elucidation of mechanisms leading to formation of the primordial follicle pool will help research efforts in ovarian biology and improve treatments of female infertility, premature ovarian failure, and reproductive cancers.