The membrane serine protease matriptase is required for epidermal barrier function, hair formation, and thymocyte development in mice, and dysregulated matriptase expression causes epidermal squamous cell carcinoma. To elucidate the specific functions of matriptase in normal and aberrant epidermal differentiation, we used enzymatic gene trapping combined with immunohistochemical, ultrastructural, and barrier function assays to delineate the spatiotemporal expression and function of matriptase in mouse keratinized tissue development, homeostasis, and malignant transformation. In the interfollicular epidermis, matriptase expression was restricted to postmitotic transitional layer keratinocytes undergoing terminal differentiation. Matriptase was also expressed in keratinizing oral epithelium, where it was required for oral barrier function, and in thymic epithelium. In all three tissues, matriptase colocalized with profilaggrin. In staged embryos, the onset of epidermal matriptase expression coincided with that of profilaggrin expression and acquisition of the epidermal barrier. In marked contrast to stratifying keritinized epithelium, matripase expression commenced already in undifferentiated and rapidly proliferating profilaggrin-negative matrix cells and displayed hair growth cycle-dependent expression. Exposure of the epidermis to carcinogens led to the gradual appearance of matriptase in a keratin-5-positive proliferative cell compartment during malignant progression. Combined with previous studies, these data suggest that matriptase has diverging functions in the genesis of stratified keratinized epithelium, hair follicles, and squamous cell carcinoma. The epithelial compartment of the skin is composed of a multilayered interfollicular epidermis and a follicular epidermis consisting of hair follicles with associated sebaceous glands.1 During epidermal development and homeostasis, cell proliferation and differentiation are compartmentalized and tightly regulated processes. The interfollicular epidermis undergoes continuous renewal when proliferative cells residing in the basal layer commit to differentiation and move outwards to give rise to the spinous layer, the granular layer, the transitional layer, and the terminally differentiated cornified layer, the stratum corneum.2 The interfollicular epidermis serves a critical function as a first line of defense against the external environment by providing a protective barrier against mechanical, chemical, and biological insults.3 The epidermis also provides a water-impermeable barrier that prevents excessive loss of body fluids, a function that is critical for the survival of all terrestrial vertebrates. The epidermal barrier function resides in the stratum corneum and consists of an interlocking meshwork of flattened terminally differentiated keratinocytes in which the plasma membrane is replaced by a highly cross-linked, insoluble cornified envelope of the corneocytes. The corneocytes are connected by desmosomes and are embedded in a specialized intercorneocyte...