The transcription factor AP-2 alpha has been implicated as a cell type-specific regulator of gene expression during vertebrate embryogenesis based on its expression pattern in neural crest cells, ectoderm, and the nervous system in mouse and frog embryos. AP-2 alpha is prominently expressed in cranial neural crest cells, a population of cells that migrate from the lateral margins of the brain plate during closure of the neural tube at day 8-9 of embryonic development. Homozygous AP-2 alpha mutant mice die perinatally with cranio-abdominoschisis, full facial clefting, and defects in cranial ganglia and sensory organs, indicating the importance of this gene for proper development. By using a subtractive cloning approach, we identified a set of genes repressed by AP-2 alpha that are described to retard cellular proliferation and induce differentiation and apoptosis. We show that these target genes are prematurely expressed in AP-2 alpha mutant mice. One of the genes isolated, the Krüppel-box transcription factor KLF-4 implicated in induction of terminal differentiation and growth regulation, is found expressed in mutant embryonic fibroblasts. We show that fibroblasts lacking AP-2 alpha display retarded growth but no enhanced apoptosis. Based on these data we suggest that AP-2 alpha might be required for cell proliferation by suppression of genes inducing terminal differentiation, apoptosis, and growth retardation.