In the mouse female reproductive tract, p63, a homologue of the p53 tumor suppressor gene, is highly expressed in basal cells of the vaginal and cervical epithelium, but not in the uterine epithelium. P63 is undetectable in the undifferentiated epithelium of the embryonic Müllerian duct. The Mullerian vaginal epithelium becomes p63 positive and stratified during the first week of postnatal development. P63 expression in the Müllerian vaginal epithelium is induced by vaginal mesenchyme. When vaginal mesenchyme was combined with uterine epithelium from newborn mouse, the uterine epithelium was induced to undergo vaginal differentiation and to express p63. Conversely, when the vaginal epithelium from the newborn mouse was recombined with uterine mesenchyme, it underwent uterine differentiation and failed to express p63. After the uterine epithelium or vaginal epithelium differentiates, the expression status of p63 in uterine (negative) and vaginal (positive) epithelia is not altered by heterotypic mesenchyme. Studies with p63-null mice demonstrate that p63 is essential for vaginal epithelial differentiation, because p63-null Müllerian vaginal epithelium developed as uterine epithelium. Thus, p63 determines whether Müllerian duct epithelial cells become uterine or vaginal. Misexpression of p63 in uterine and vaginal epithelial lesions induced by neonatal diethylstilbestrol (DES) exposure induces pathological changes. Irregularities in p63 expression (and thus epithelial differentiation) are observed in the uterine and vaginal epithelia of neonatally DES-exposed mice during the first week of postnatal development. Thus, neonatal DES exposure abnormally transforms uterine and vaginal epithelial differentiation by perturbing epithelial expression of p63 during development.