In cultured cells, mutants of the Adenovirus E1a oncoprotein which bind to a reduced set of cellular proteins, including p105-Rb, p107, and p60-cyclin A, are transformation defective but can still interfere with exogenous growth inhibitory and differentiating signals, such as those triggered by TGF-beta. We have tested the ability of one such mutant, NTdl646, to interfere with keratinocyte growth and differentiation in vivo, in the skin of transgenic mice. Keratinocyte-specific expression of the transgene was achieved by using a keratin 5 promoter. Two independent lines of transgenic mice were obtained which expressed E1a specifically in their skin and exhibited an aberrant hair coat phenotype with striking regional variations. Affected hair shafts were short and crooked and hair follicles exhibited a dystrophic or absent inner root sheath. Interfollicular epidermis was normal, but its hyperplastic response to acute treatment with TPA (12-O-tetradecanoylphorbol-13-acetate) was significantly reduced. Primary keratinocytes derived from these animals were partially resistant to the effects of TPA and TGF-beta. The rate of spontaneous or chemically induced skin tumors in the transgenic mice was not increased. Thus, expression of a transgene which interferes with known negative growth regulatory proteins causes profound disturbances of keratinocyte maturation into a highly organized structure such as the hair follicle but does not lead to increased and/or neoplastic proliferation.