In the mouse Tabby (Ta) mutant and human X-linked anhidrotic ectodermal dysplasia (EDA) syndrome development of several ectodermal organs such as hair, teeth, and sweat glands is impaired. The gene behind Tabby and EDA has been cloned, and several alternative transcripts have been isolated. The protein product named ectodysplasin had no obvious function or prominent homology to other known gene products apart from a short collagen-like sequence. We have isolated two novel Ta transcripts which are variants of the longest isoform of Tabby, named Ta-A. In situ hybridizations revealed Ta-A to be the major transcript in the developing embryo. It was detected in the endoderm of early embryos and subsequently in specific locations in the neuroepithelium and ectoderm. Unexpectedly, sequence analysis of the most C-terminal domain of Ta revealed that ectodysplasin is a novel member of the tumor necrosis factor (TNF) ligand superfamily. Mouse ectodysplasin was biochemically and functionally characterized, and shown to be a glycosylated, oligomeric type II membrane protein (N-terminus inside), all characteristics typical to TNF-like proteins. Members of the TNF family are critically involved in host defence and immune response often mediating either apoptosis or cell survival. Expression of Ta in several epithelial cell lines did not result in prominent changes in cell morphology and did not promote apoptosis. Instead, it was shown to promote cell adhesion to extracellular matrix, a function consistent with its postulated role in epithelial-mesenchymal interactions regulating the development of ectodermal appendages. Ectodysplasin is the first TNF-like signaling molecule described known to be required for epithelial morphogenesis.