Notch signaling promotes commitment of keratinocytes to differentiation and suppresses tumorigenesis. p63, a p53 family member, has been implicated in establishment of the keratinocyte cell fate and/or maintenance of epithelial self-renewal. Here we show that p63 expression is suppressed by Notch1 activation in both mouse and human keratinocytes through a mechanism independent of cell cycle withdrawal and requiring down-modulation of selected interferon-responsive genes, including IRF7 and/or IRF3. In turn, elevated p63 expression counteracts the ability of Notch1 to restrict growth and promote differentiation. p63 functions as a selective modulator of Notch1-dependent transcription and function, with the Hes-1 gene as one of its direct negative targets. Thus, a complex cross-talk between Notch and p63 is involved in the balance between keratinocyte self-renewal and differentiation. Normal tissue homeostasis is determined by a complex interplay between developmental signals and other cell regulatory pathways. Notch cell surface receptors and their ligands belonging to the Delta and Serrate/Jagged families play a crucial role in cell fate determination and differentiation, functioning in a cell-and context-specific manner (Artavanis-Tsakonas et al. 1999). In mammalian cells, Notch activation is generally thought to maintain stem cell potential and inhibit differentiation, thereby promoting carcinogenesis (Artavanis-Tsakonas et al. 1999). However, in specific cell types such as keratinocytes, increased Notch activity causes exit from the cell cycle and commitment to differentiation (Lowell et al. 2000;Rangarajan et al. 2001;Nickoloff et al. 2002), whereas down-modulation or loss of Notch1 function promotes carcinogenesis (Talora et al. 2002;Nicolas et al. 2003).In the human epidermis, localized expression of the Notch-ligand Delta in putative "stem cells" has been proposed to induce commitment of neighboring Notch1-expressing keratinocytes to a "transit-amplifying" phenotype, through a negative feedback mechanism of lateral inhibition (Lowell et al. 2000). On the other hand, in both mouse and human epidermis, Jagged 1/2, Notch1, and Notch2 are coexpressed in differentiating keratinocytes of the supra-basal layers, consistent with a positive feedback loop between these molecules that serves to reinforce and synchronize Notch activation with differentiation (Luo et al. 1997;Rangarajan et al. 2001;Nickoloff et al. 2002).The best characterized "canonical" pathway of Notch activation involves proteolytic cleavage and translocation of the cytoplasmic domain of the receptor to the nucleus, where it associates with the DNA-binding protein RBP-J (CBF-1, CSL), converting it from a repressor