The Notch and Calcineurin/NFAT pathways have both been implicated in control of keratinocyte differentiation. Induction of the p21(WAF1/Cip1) gene by Notch 1 activation in differentiating keratinocytes is associated with direct targeting of the RBP-Jkappa protein to the p21 promoter. We show here that Notch 1 activation functions also through a second Calcineurin-dependent mechanism acting on the p21 TATA box-proximal region. Increased Calcineurin/NFAT activity by Notch signaling involves downregulation of Calcipressin, an endogenous Calcineurin inhibitor, through a HES-1-dependent mechanism. Besides control of the p21 gene, Calcineurin contributes significantly to the transcriptional response of keratinocytes to Notch 1 activation, both in vitro and in vivo. In fact, deletion of the Calcineurin B1 gene in the skin results in a cyclic alopecia phenotype, associated with altered expression of Notch-responsive genes involved in hair follicle structure and/or adhesion to the surrounding mesenchyme. Thus, an important interconnection exists between Notch 1 and Calcineurin-NFAT pathways in keratinocyte growth/differentiation control.