Recently we demonstrated a strong induction of activin expression after skin injury, suggesting a function of this transforming growth factor-beta family member in wound repair. To test this possibility, we generated transgenic mice that overexpress the activin betaA chain in the epidermis under the control of a keratin 14 promoter. The transgenic mice were significantly smaller than control littermates, and they had smaller ears and shorter tails. In their skin, the fatty tissue was replaced by connective tissue and a severe thickening of the epidermis was found. The spinous cell layer was significantly increased, and the epidermal architecture was highly disorganized. These histological abnormalities seem to result from increased proliferation of the basal keratinocytes and abnormalities in the program of keratinocyte differentiation. After skin injury, a significant enhancement of granulation tissue formation was detected in the activin-overexpressing mice, possibly as a result of premature induction of fibronectin and tenascin-C expression. These data reveal novel activities of activin in the regulation of keratinocyte proliferation and differentiation as well as in dermal fibrosis and cutaneous wound repair.