Activin is a member of the transforming growth factor b (TGF-b) family, which plays a crucial role in skin morphogenesis and wound healing. To gain insight into the underlying mechanisms of action, we searched for activin-regulated genes in cultured keratinocytes. One of the identified target genes encodes Id1, a negative regulator of helix-loop-helix transcription factors. We show that Id1, Id2, and Id3 are strongly downregulated by activin in keratinocytes in vitro and in vivo. To determine the role of Id1 in keratinocyte biology, we generated stable HaCaT keratinocyte cell lines overexpressing this protein. Our results revealed that enhanced levels of Id1 do not affect proliferation of keratinocytes in monoculture under exponential culture conditions or in response to activin or TGF-b1. However, in three-dimensional organotypic cultures, Id1-overexpressing HaCaT cells formed a hyperthickened and disorganized epithelium that was characterized by enhanced keratinocyte proliferation, abnormal differentiation, and an increased rate of apoptosis. These results identify an important function of Id1 in the regulation of epidermal homeostasis.