To investigate gene synergism in multistage skin carcinogenesis, the RU486-inducible cre/lox system was employed to ablate Pten function (K14.cre/Δ5Ptenflx) in mouse epidermis expressing activated Fos (HK1.Fos). RU486-treated HK1.Fos/Δ5Ptenflx mice exhibited hyperplasia, hyperkeratosis and tumours that progressed to highly differentiated keratoacanthomas, rather than to carcinomas, owing to re-expression of high p53 and p21WAF levels. Despite elevated MAP kinase activity, cyclin D1 and cyclin E2 overexpression, and increased AKT activity that produced areas of highly proliferative papillomatous keratinocytes, increasing levels of GSK3β inactivation induced a novel p53/p21WAF expression profile, which subsequently halted proliferation and accelerated differentiation to give the hallmark keratosis of keratoacanthomas. A pivotal facet to this GSK3β-triggered mechanism centred on increasing p53 expression in basal layer keratinocytes. This increase in expression reduced activated AKT expression and released inhibition of p21WAF, which accelerated keratinocyte differentiation, as indicated by unique basal layer expression of differentiation-specific keratin K1 alongside premature filaggrin and loricrin expression. Thus, Fos synergism with Pten loss elicited a benign tumour context where GSK3β-induced p53/p21WAF expression continually switched AKT-associated proliferation into differentiation, preventing further progression. This putative compensatory mechanism required the critical availability of normal p53 and/or p21WAF, otherwise deregulated Fos, Akt and Gsk3β associate with malignant progression.