The roles of peroxisome proliferator-activated receptors (PPARs) and CCAAT/enhancer-binding proteins (C/EBPs) in keratinocyte and sebocyte differentiation suggest that both families of transcription factors closely interact in the skin. Initial characterization of the mouse PPARbeta promoter revealed an AP-1 site that is crucial for the regulation of PPARbeta expression in response to inflammatory cytokines in the skin. We now present evidence for a novel regulatory mechanism of the expression of the PPARbeta gene by which two members of the C/EBP family of transcription factors inhibit its basal promoter activity in mouse keratinocytes. We first demonstrate that C/EBPalpha and C/EBPbeta, but not C/EBPdelta, inhibit the expression of PPARbeta through the recruitment of a transcriptional repressor complex containing HDAC-1 to a specific C/EBP binding site on the PPARbeta promoter. Consistent with this repression, the expression patterns of PPARbeta and C/EBPs are mutually exclusive in keratinocytes of the interfollicular epidermis and hair follicles in mouse developing skin. This work reveals the importance of the regulatory interplay between PPARbeta and C/EBP transcription factors in the control of proliferation and differentiation in this organ. Such insights are crucial for the understanding of the molecular control regulating the balance between proliferation and differentiation in many cell types including keratinocytes.