We have previously shown that RB plays an important role in the maintenance of the epithelial phenotype. p21 is also involved in several terminal differentiation systems including keratinocytes. We report here that p21 is an RB target gene in epithelial cells, but not in fibroblasts where RB is unable to transactivate p21 transcriptional expression. In epithelial cells, when RB family factors were inactivated by SV40 T antigen (LT), p21 expression was strongly repressed, whereas its expression was not affected when the cells were transformed by a mutated LT leaving RB active but inactivating p53. Moreover, retransformation by RB of LT transformed epithelial cells totally restored p21 expression. By cotransfection experiments and using deletions and point mutations of the p21 promoter, we show that the minimal region required for the RB-mediated transcriptional activation maps to a GC-rich region located between -83 and -74. This region is shown to interact specifically with the transcription factor Sp1 and Sp3. Thus for the first time, we show a positive transcriptional relationship between RB and p21 in epithelial cells. Since p21 keeps RB in a hypophosphorylated state important for its transcriptional activity during differentiation, our results imply an auto-loop of regulation between RB and p21 that may be essential for the maintenance of the differentiation state. We propose that this transcriptional relationship might be necessary of their roles in cell cycle arrest and in several differentiation pathways.