Late in the terminal differentiation of epidermis and cultured epidermal cells, a protein envelope located beneath the plasma membrane becomes cross-linked by cellular transglutaminase. The process of cross-linking can be initiated in cultured epidermal cells by agents affecting cell membrane permeability--nonionic detergents, high salt concentrations and ionophores. These agents initiate the cross-linking process by making calcium ions available to the transglutaminase. A soluble precursor of the cross-linked envelope has been identified in crude extracts of cultured epidermal cells by its ability to incorporate labeled amines through the action of transglutaminase. The protein has been purified to homogeneity by gel filtration and chromatography on columns of DEAE-cellulose and hydroxyapatite. Comprising an estimated 5--10% of the soluble cell proteins, it has a molecular weight of about 92,000, is isoelectric at pH 4.5 +/- 0.3 and has an unusual amino acid composition (46% Glx residues). It is chemically and immunochemically unrelated to keratins. The following evidence confirms that the protein becomes incorporated into cross-linked envelopes: first, washed cross-linked envelopes bind antibody to the purified protein, as shown by indirect immunofluorescence; second, absorption of the antiserum with washed envelopes removes all detectable antibodies to the purified protein; and third, the protein cannot be extracted from keratinocytes after their envelopes have become cross-linked. Examination of sections of epidermis by immunofluorescence, using antiserum to the purified protein, reveals that in addition to the stratum corneum, the living cells of the outer half of the spinous layer react strongly. The envelope precursor is present in the cytoplasm, but becomes concentrated at the cell periphery, where it will be cross-linked later, when the cells have passed through the granular layer. The protein is also concentrated in a peripheral location in cultured epidermal cells.