Epidermal keratinocytes have important immunologic functions, which is apparent during wound healing, in psoriasis, and in allergic and inflammatory reactions. In these processes, keratinocytes not only produce cytokines and growth factors that attract and affect lymphocytes but also respond to the polypeptide factors produced by the lymphocytes. Gamma interferon (IFN-y) is one such signaling polypeptide. Its primary molecular effect is activation of specific transcription factors that regulate gene expression in target cells. In this work, we present a molecular mechanism of lymphocyte-keratinocyte signaling in the epidermis. We have induced cutaneous delayed-type hypersensitivity reactions that are associated with an accumulation of lymphocytes. These resulted in activation and nuclear translocation of STAT-91, the IFN-,y-activated transcription factor, in keratinocytes in vivo and subsequent induction of transcription of keratin K17. Within the promoter of the K17 keratin gene, we have identified and characterized a site that confers the responsiveness to IFN--y and that binds the transcription factor STAT-91. Other keratin gene promoters tested were not induced by IFN-'y. These results characterize at the molecular level a signaling pathway produced by the infiltration of lymphocytes in skin and resulting in the specific alteration of gene expression in keratinocytes.The role of epidermal keratinocytes in defense against mechanical injury and desiccation has been appreciated for a long time, but their role in immunological defense became apparent only recently, when it was realized that keratinocytes can produce a cornucopia of growth factors, chemoattractants, and cytokines (reviewed in reference 24). Furthermore, keratinocytes express receptors for many polypeptide factors, respond to autocrine stimulation, and also respond to the signals produced by the immune system (30). The importance of signaling between keratinocytes and lymphocytes is apparent in the cutaneous disorders that involve both of these cell types, including delayed-type hypersensitivity (DTH), psoriasis, and atopic dermatitis (21,23,27).The most extensively studied signaling molecules of the immune system are the alpha, beta, and gamma interferons (IFN-a, IFN-1, and IFN--y), a subset of cytokines originally described as factors that protect cells from viral infections (reviewed in references 35 and 41). Certain diseases are thought to be associated with high levels of IFN-y in epidermis (27). Although the role of interferons in pathologic processes has not been clearly defined, they have been used recently in therapeutic trials for several dermatologic diseases, including those caused by viruses (12).IFN-a and IFN-P share a cell surface receptor, whereas IFN--y binds to a different receptor, and although their biological effects largely overlap, the effects of IFN-,y are distinct