The mechanism of cell cycle withdrawal during terminal differentiation is poorly understood. We report here that the cyclin-dependent kinase (CDK) inhibitor p21Cip1/WAF1 is induced at early times of both keratinocyte and myoblast differentiation. p21Cip1/WAF1 induction is accompanied by a drastic inhibition of total Cdk2, as well as p21Cip1/WAF1-associated CDK kinase activities. p21Cip1/WAF1 has been implicated in p53-mediated G1 arrest and apoptosis. In keratinocyte differentiation, Cip1/WAF1 induction is observed even in cells derived from p53-null mice. Similarly, keratinocyte differentiation is associated with induction of Cip1/WAF1 promoter activity in both wild-type and p53-negative keratinocytes. Induction of the Cip1/WAF1 promoter upon differentiation is abolished by expression of an adenovirus E1A oncoprotein (d1922/947), which is unable to bind p105-Rb, p107, or cyclin A but which still binds the nuclear phosphoprotein p300. Overexpression of p300 can suppress the E1A effect, independent of its direct binding to E1A. Thus, terminal differentiation-induced growth arrest in both keratinocyte and myoblast systems is associated with induction of Cip1/WAF1 expression. During keratinocyte differentiation, Cip1/WAF1 induction does not require p53 but depends on the transcriptional modulator p300.