Self-renewing epithelia are characterized by a high turnover rate and a fine balance between growth and differentiation. Such a balance is influenced by many exogenous factors, including gradients of diffusible molecules, cell/substrate adhesion contacts, and direct cell-cell communication. The inter-connection between these various extracellular signals and underlying intracellular pathways is clearly of great interest. Primary keratinocytes of either human or murine origin provide an ideal experimental system to elucidate early signaling events involved in the control of epithelial differentiation. Relative to established cell lines, use of a primary system eliminates the possibility of alterations in critical regulatory events which may occur during prolonged propagation in culture. Primary keratinocytes are easily grown in large numbers, and their differentiation can be induced under well-defined culture conditions. The ensuing rapid and homogeneous response is amenable to careful biochemical analysis. Gene transfer technology (transient transfections, adenoviral and retroviral vectors), together with the use of keratinocytes derived from gene knockout and transgenic mice, makes it possible to assess the specific contribution of individual genes to the control of the differentiation process. This review focuses on the significant progress that has been made over the last few years in our understanding of the specific signals that trigger keratinocyte differentiation, the underlying signaling pathways, and how they impinge on specific transcription and cell-cycle control mechanisms associated with the onset of keratinocyte differentiation. Recent developments and future directions in this important area of research will be highlighted.