Tumor necrosis factor alpha (TNF alpha) localizes to the epidermis when injected in vivo, but its role in the skin has heretofore not been evaluated. As a first approach to assessing the role of TNF alpha in the skin, we evaluated the binding and biological effects of TNF alpha on human neonatal foreskin keratinocytes maintained in culture. We found that TNF alpha at 0.3-1.0 nM inhibited proliferation of keratinocytes in a reversible fashion as demonstrated by a reduction in total DNA content and clonal growth. The antiproliferative effects were most marked when TNF alpha was added in the preconfluent stages of cell growth. Accompanying this antiproliferative effect was a stimulation by TNF alpha of differentiation of keratinocytes as indicated by the stimulation of cornified envelope formation. Keratinocytes specifically bound TNF alpha, reaching maximal binding in 2 h at 340C or 8 h at 4VC. Much of the apparent binding at 340C was due to internalization of the TNF alpha. At 4VC the rate of internalization was much less. Confluent keratinocytes showed a single class of high-affinity receptors with 1,250 receptors/cell and a Kd of 0.28 nM. These data suggest a role for TNF alpha in the growth and differentiation of the epidermis.