Loss-of-function mutation in the profilaggrin gene is a major risk factor for atopic dermatitis (AD). Previously, we showed that a neutral cysteine protease, bleomycin hydrolase (BH), has a role in generating natural moisturizing factors, and calpain I is an upstream protease in the filaggrin degradation pathway. Here, we investigated the transcriptional regulatory mechanisms of BH and the relevance of BH to AD. First, we cloned the 5-flanking region of BH. Deletion analyses identified a critical region for BH promoter activity within ؊216 bp upstream. Electrophoretic mobility shift assay revealed that MZF-1, Sp-1, and interferon regulatory factor-1/2 could bind to this region in vitro. Moreover, site-directed mutagenesis of the MZF-1 and Sp-1 motifs markedly reduced BH promoter activity. These data indicate that BH expression is up-regulated via MZF-1 and Sp-1. Interestingly, a Th1 cytokine, IFN-␥, significantly reduced the expression of BH. Analyses with site-directed mutagenesis and small interference RNA supported the suppressing effect of IFN-␥ on BH expression. On the other hand, a Th2 cytokine, IL-4, did not show any direct effect on BH expression. However, it down-regulated MZF-1 and Sp-1 in cultured keratinocytes, indicating that IL-4 could work as a suppressor in BH regulation. Lastly, we examined expression of BH in skins of patients with AD. BH activity and expression were markedly decreased in AD lesional skin, suggesting a defect of the filaggrin degradation pathway in AD. Our results suggest that BH transcription would be modulated during both differentiation and inflammation.During terminal differentiation, keratinocytes synthesize characteristic proteins, including filaggrin, loricrin, trychohyalin, and involucrin, which are encoded by the so-called "epidermal differentiation complex," a cluster of genes on human chromosome 1q21 (1, 2). Filaggrin is a key protein in formation of the cornified cell envelope, which is critical for an effective epidermal barrier (3, 4). Recent genetic studies have shown that loss-of-function mutations in FLG, the human gene encoding profilaggrin and filaggrin, are the cause of the semi-dominant skin scaling disorder ichthyosis vulgaris and are a major risk factor for the development of atopic dermatitis (AD), 2 eczemarelated asthma, and other allergic phenotypes (4 -6). These mutations are present in 10 -40% of the population, depending on race and country of habitation.Filaggrin is deiminated by peptidylarginine deiminase, resulting in its unfolding and further degradation into hygroscopic amino acids that constitute the natural moisturizing factors (NMF) that maintain epidermal hydration (7,8). NMF consist primarily of amino acids, including citrulline, and their derivatives, such as pyrrolidone carboxylic acid and urocanic acids, together with lactic acid, urea, citrate, and sugars (9 -11). Previously, we identified the neutral cysteine protease bleomycin hydrolase (BH) as an NMF-generating enzyme and also showed that calpain I is an upstream protease in the fil...