S ince mouse keratinocytes are tolerogenic antigen presenting cells for T cell activation, the expression of second signal molecules such as B7-1 was targeted to epidermal keratinocytes (KC) in vivo in transgenic mice. The expression vector used to create transgenic mice consisted of a keratin 14 promoter fused 5' to the full length open reading frame of the cDNA encoding mouse B7-1 (between 10 and 30 copies of the transgene per genome). Expression of B7-1 cell surface protein was assessed by in situ immunostaining of cryostat sections of tail skin with CTLA-4/Ig fusion protein, revealing high levels of cell surface expression of B7 by all epidermal KC of transgenic mice, and a lack of such expression in nontransgenic animals. The skin of such transgenic mice (derived from three different founder mice) was grossly and histologically normal, with normal numbers of Langerhans cells and dendritic epidermal T cells. Immunologic challenge of transgenic mice with epicutaneous haptens such as fluorescein isothiocyanate revealed enhanced and persistent delayed-type hypersensitivity responses, with an altered kinetics of resolution when compared with nontransgenic controls. These data indicate that in normal, nontransgenic mice, tolerogenic antigen presentation by KC plays an important physiologic role in damping T cell-mediated inflammation in the skin by competing with professional APC for TCR occupancy in antigen specific T-lymphocytes that migrate into the epidermis. This also implies that altered regulation of B7-1 gene expression by epidermal cells may account for skin "hyperresponsiveness" encountered in some chronic dermatologic disorders.