The loss of transglutaminase 1 enzyme (TGase 1) activity causes lamellar ichthyosis. Recessive X-linked ichthyosis (XI) results from accumulation of excess cholesterol 3-sulfate (CSO 4 ) in the epidermis but the pathomechanism how elevated epidermal CSO 4 causes ichthyosis is largely unknown. Here we provide evidence that XI is also a consequence of TGase 1 dysfunction. TGase 1 is a key component of barrier formation in keratinocytes: it participates in the cross-linking of cell envelope (CE) structural proteins, and also forms the lipid bound envelope by esterification of long chain -hydroxyceramides onto CE proteins. Using involucrin and an epidermal -hydroxyceramide analog as substrates, kinetic analyses revealed that at membrane concentrations above 4 mol %, CSO 4 caused a marked and dose-dependent inhibitory effect on isopeptide and ester bond formation. Sequencing of tryptic peptides from TGase 1-reacted involucrin showed a large increase in deamidation of substrate glutamines. We hypothesize that supraphysiological levels of CSO 4 in keratinocyte membranes distort the structure of TGase 1 and facilitate the access of water into its active site causing hydrolysis of substrate glutamine residues. Our findings provide further evidence for the pivotal role of the TGase 1 enzyme in CE formation.Assembly of an effective epidermal barrier structure is an essential adaptation to terrestrial life. In mammals the outermost bulwark of this barrier is the cornified layer of the epidermis, composed of flattened corneocytes mortared together by orderly lipid laminae. During terminal differentiation, individual corneocytes acquire a specialized cell peripheral structure termed the cornified cell envelope (CE), 1 which is responsible for maintenance of mechanical and chemical protection and indirectly contributes to water permeability barrier (see Refs. 1 and 2, for reviews). The CE is composed of two parts. The ϳ10 nm thick protein envelope is formed by covalent cross-linking of several structural proteins by sulfhydryl oxidases and transglutaminases (TGases). This highly insoluble protein meshwork is coated by the lipid envelope, a ϳ5 nm thick layer of -hydroxyceramides with uniquely long (C 28 -C 36 ) fatty acyl moieties (3). These are covalently attached by ester bonds through their -hydroxyl group to selected glutamines to envoplakin, periplakin, and involucrin components of the protein envelope (4).Terminal differentiation of keratinocytes is accompanied by vigorous lipid metabolism and synthesis of keratinization-specific lipids in the granular layer. Newly synthesized lipids are temporarily stored in cytoplasmic lamellar bodies, in which they are arranged as stacks of tetralaminar sheets. The lamellar body lipids consist largely of free fatty acids, (glucosyl)ceramides, cholesterol, and its acyl or sulfate esters (3). In the uppermost granular layer the lamellar bodies fuse with the cell membrane, and release their contents which assume broad, multilamellar lipid sheets between corneocytes. This process approxima...