Lipids and acid hydrolases have been characterized in a subcellular fraction, enriched with lamellar granules (LG), derived from fetal rat epidermis. This fraction contains 23% glycosyl ceramides and ceramides, 15% free sterols, and 34% phospholipids. The lipid/protein ratio is 2.0. The sterols and sphingolipids were present in proportions similar to those previously reported in stratum corneum. These findings provide direct biochemical evidence for the widely accepted hypothesis that stratum corneum lipids are derived from exocytosis of lamellar granules into the intercellular space. The LG fraction was enriched in certain acid hydrolases including glucosidase, acid phosphatase, phospholipases A, and sphingomyelinase; other acid hydrolases, i.e., amino-glycosidases, glactosidase and aryl sulfatase (pH 5.5), and steroid sulfatase were not preferentially localized in this fraction. By modulation of phospholipids, glyco-lipids, and proteins in the membrane regions of stratum corneum, the acid hydrolases of LG may play a role relevant to the function and desquamation of stratum corneum.