During epithelial homeostasis, stem cells divide to produce progenitor cells, which not only proliferate to generate the cell mass but also respond to cellular signaling to transition from a proliferative state to a differentiation state. Such a transition involves functional alterations of transcriptional factors, yet the underlying molecular mechanisms are poorly understood. Recent studies have implicated Kruppel-like factors (KLFs) including KLF5 in the renewal and maintenance of stem/progenitor cells. Here we demonstrate that the pro-proliferative factor KLF5 becomes anti-proliferative upon TGF-mediated acetylation in an in vitro model of epithelial homeostasis. In the HaCaT epidermal cell line treated with or without TGF, we found that KLF5 was not only essential for cell proliferation, it was also indispensable for TGF-induced anti-proliferation in these cells. KLF5 inhibited the expression of p15 (CDKN2B), a cell cycle inhibitor, without TGF, but became a coactivator in TGF-induced p15 expression in the same cells. Mechanistically, TGF recruited acetylase p300 to acetylate KLF5, and acetylation in turn altered the binding of KLF5 to p15 promoter, resulting in the reversal of KLF5 function. These studies not only demonstrate that a basic transcription factor can be both pro-proliferation and anti-proliferation in epithelial homeostasis, they also present a unique mechanism for how transcriptional regulation changes during the transition from proliferation to inhibition of proliferation. Furthermore, they establish KLF5 as an essential cofactor for TGF signaling.Epithelia constitute the surface and lining of many solid tissues and have essential functions in different tissues. They are maintained through epithelial homeostasis, which involves the proliferation of stem/progenitor cells and the differentiation of their daughter cells. Epithelial homeostasis constantly occurs in vivo, and its disruption causes different diseases including cancer (1). At the molecular level, signaling from stroma compartment in a tissue such as transforming growth factor  (TGF) 2 signaling regulates epithelial homeostasis through a transcriptional network, but the molecular details are not well understood.The basic transcription factor KLF5 is ubiquitously expressed in many tissues including the breast, colon, intestine, lung, prostate, etc (2-5). KLF5 is highly expressed in proliferating epithelial cells such as immortal but untransformed epithelial cell lines and proliferating primary cultures of epithelial cells, which mostly represent progenitor cells (2, 3, 6, 7). In normal intestine, KLF5 is expressed at a higher level in basal rapidly proliferating cells, but at a lower level in mature and differentiated cells (8) and knock-out of one KLF5 allele significantly reduced the size of villi in mouse intestine (8). In vivo overexpression of KLF5 in epidermis causes hyperplasia of basal cells but lack of mature skin (9), further indicating a proproliferative role of KLF5 in epithelial homeostasis. Recently a combinatio...