The NH(2) terminus of LEF1 is frequently mutated in human sebaceous tumors. To investigate how this contributes to cancer, we did two-stage chemical carcinogenesis on K14DeltaNLef1 transgenic mice, which express NH(2)-terminally truncated Lef1 in the epidermal basal layer. Transgenic mice developed more tumors, more rapidly than littermate controls, even without exposure to tumor promoter. They developed sebaceous tumors, whereas controls developed squamous cell carcinomas. K14DeltaNLef1 epidermis failed to up-regulate p53 and p21 proteins during tumorigenesis or in response to UV irradiation, and this correlated with impaired p14ARF induction. We propose that LEF1 NH(2)-terminal mutations play a dual role in skin cancer, specifying tumor type by inhibiting Wnt signaling and acting as a tumor promoter by preventing induction of p53.