The keratinocyte has receptors for, responds to, and produces both tumor necrosis factor-alpha (TNF) and 1,25-dihydroxyvitamin D [1,25-(OH)2D]. Both TNF and 1,25-(OH)2D facilitate the differentiation of keratinocytes. To explore the possibility that TNF stimulates keratinocyte differentiation at least in part by regulating 1,25-(OH)2D production we examined the effect of TNF on both 1,25-(OH)2D production and differentiation (transglutaminase activity, cornified envelope formation) at different stages of differentiation. 1,25-(OH)2D production, transglutaminase activity, and cornified envelope formation are sequentially increased during differentiation such that 1,25-(OH)2D production occurs first, followed by transglutaminase activity and, finally, cornified envelope formation. In preconfluent cells, TNF stimulated 1,25-(OH)2D production. Interferon-gamma also stimulated 1,25-(OH)2D production at low concentrations, but this was not additive to that by TNF. The stimulatory effect of TNF was maximal after 1-2 days of incubation and decreased with prolonged incubation. TNF had little effect on cornified envelope formation and transglutaminase activity in the preconfluent cells. Once keratinocytes achieved confluence, TNF stimulated transglutaminase activity and cornified envelope formation, but inhibited 1,25-(OH)2D production. Our results suggest that TNF regulates 1,25-(OH)2D production as part of its ability to accelerate keratinocyte differentiation; whether TNF stimulates or inhibits 1,25-(OH)2D production depends on whether TNF is added before or after the cell has reached its maximal capacity to make 1,25-(OH)2D.