A structural, profile-based algorithm was used to identify interleukin 20 (IL-20), a novel IL-10 homolog. Chromosomal localization of IL-20 led to the discovery of an IL-10 family cytokine cluster. Overexpression of IL-20 in transgenic (TG) mice causes neonatal lethality with skin abnormalities including aberrant epidermal differentiation. Recombinant IL-20 protein stimulates a signal transduction pathway through STAT3 in a keratinocyte cell line, demonstrating a direct action of this ligand. An IL-20 receptor was identified as a heterodimer of two orphan class II cytokine receptor subunits. Both receptor subunits are expressed in skin and are dramatically upregulated in psoriatic skin. Taken together, these results demonstrate a role in epidermal function and psoriasis for IL-20, a novel cytokine identified solely by bioinformatics analysis.