Rho GTPases integrate control of cell structure and adhesion with downstream signaling events. In keratinocytes, RhoA is activated at early times of differentiation and plays an essential function in establishment of cell-cell adhesion. We report here that, surprisingly, Rho signaling suppresses downstream gene expression events associated with differentiation. Similar inhibitory effects are exerted by a specific Rho effector, CRIK (Citron kinase), which is selectively down-modulated with differentiation, thereby allowing the normal process to occur. The suppressing function of Rho/CRIK on differentiation is associated with induction of KyoT1/2, a LIM domain protein gene implicated in integrin-mediated processes and/or Notch signaling. Like activated Rho and CRIK, elevated KyoT1/2 expression suppresses differentiation. Thus, Rho signaling exerts an unexpectedly complex role in keratinocyte differentiation, which is coupled with induction of KyoT1/2, a LIM domain protein gene with a potentially important role in control of cell self renewal.