ΔNp63 is overexpressed in squamous carcinomas where it is associated with proliferation and is believed to enhance cell growth by blocking p53-mediated transactivation. In normal epithelium, ΔNp63α protein expression is abundant in basal cells and decreases with differentiation. To explore the biological consequences of ΔNp63α overexpression in relation to squamous carcinogenesis, we evaluated its effect on normal squamous differentiation and p53 transactivation function in keratinocytes. Forced overexpression of ΔNp63α in primary murine keratinocytes in vitro inhibits morphological differentiation induced by elevated extracellular [Ca 2+], abrogates Ca 2+-induced growth arrest, and blocks expression of maturation-specific proteins keratin 10 and filaggrin. This suggests that ΔNp63 overexpression in squamous carcinomas may serve to maintain the basal cell phenotype and promote cell survival. ΔNp63α blocks transactivation of p53 responsive reporter constructs mediated by endogenous or exogenous p53 at 17 h postinfection, as expected. However, at 41 h, when p53-mediated transactivation is diminished, ΔNp63α enhances transactivation of these reporter constructs by 2.2–12-fold over control. Maximal ΔNp63α-induced transactivation requires intact p53 responsive elements, but is independent of cellular p53 status. This positive transcriptional function of ΔNp63α appears to be cell-type specific, as it is not observed in primary dermal fibroblasts or Saos-2 cells. These findings support ΔNp63α as a master regulator of keratinocyte differentiation, and suggest a novel function of this protein in the maintenance of epithelial homeostasis.