Human epidermal keratinocytes can be grown in culture under conditions in which they assemble a tissue with the same basic organization as normal epidermis. The cells stratify, mitosis is restricted to the basal layer and terminal differentiation occurs as the cells move through the suprabasal layers. Keratinocytes do not have to leave the basal layer in order to undergo terminal differentiation, but the two processes are normally linked, because during terminal differentiation the adhesive affinity of keratinocytes for the culture substratum and for other keratinocytes is reduced. Down-regulation of synthesis of basement membrane components and their receptors may provide the molecular basis for the reduction in cell-substratum adhesiveness. However, the molecules that mediate changes in cohesiveness have not yet been identified. Restriction of substratum contact, so that cells are prevented from spreading, appears to be one signal that induces keratinocytes to stop dividing and undergo terminal differentiation.