The skin is a dynamic organ consisting of the dermis and epidermis, with the latter continuously undergoing regeneration to replace cells lost through normal exposure to the environment. The epidermis is composed of several cell layers. The deepest layer, located at the dermal-epidermal junction, is the basal layer, consisting of the undifferentiated basal keratinocytes, which continuously proliferate. As the cells migrate up through the epidermis, keratinocytes undergo a distinct pattern of differentiation that is essential for the function of the skin as a protective barrier. This pattern is characterized by growth arrest and expression of the mature cytokeratins 1 and 10 in the first differentiated layer of the epidermis, the spinous layer. Early differentiation in the spinous layer is followed by late differentiation in the granular layer accompanied by expression of proteins, including the enzyme transglutaminase, that are essential for the formation of the cornified envelope and corneocytes. The corneocytes are terminally differentiated and constitute the outer layer of the epidermis, the cornified layer, which gives skin its resistance to mechanical stresses (for reviews, see Refs. 1 and 2). The mechanism by which 1,25(OH) 2 D 3 inhibits proliferation and stimulates differentiation is still unclear. This hormone is thought to function through the vitamin D receptor, a transcription factor affecting expression of genes possessing vitamin D response elements. However, the keratin 1 gene is the only keratinocyte differentiation marker known to possess a 1,25(OH) 2 D 3 response element (5, 6), and the expression of this marker is inhibited by 1,25(OH) 2 D 3 (7). In addition, 1,25(OH) 2 D 3 was recently shown to enhance the expression of several phosphoinositide-specific phospholipase C isoenzymes (8), the activity of which generates diacylglycerol (DAG). DAG, in turn, is known to regulate the activity of protein kinase C (PKC), and numerous data suggest the involvement of PKC in the regulation of keratinocyte growth and differentiation (reviewed in Refs. 1 and 9).Although PKC-activating DAG can be generated directly by phosphoinositide turnover via phospholipase C, such DAG can also be generated indirectly by an additional pathway. Diacylglycerol is generated by the combination of phospholipase D (PLD), which hydrolyzes phospholipids to generate phosphatidic acid (PA), and PA phosphohydrolase, which dephosphorylates PA to yield DAG (reviewed in Ref. 10). Indeed, in several cell systems, PLD activity has been shown to underlie at least