Human keratinocyte growth factor (KGF) is an epithelial cell specific mitogen which is secreted by normal stromal fibroblasts. In the present studies, we demonstrate that KGF is as potent as EGF in stimulating proliferation of primary or secondary human keratinocytes in tissue culture. Exposure of KGF- or EGF-stimulated keratinocytes to 1.0 mM calcium, an inducer of differentiation, led to cessation of cell growth. However, immunologic analysis of early and late markers of terminal differentiation, K1 and filaggrin, respectively, revealed striking differences in keratinocytes propagated in the presence of these growth factors. With KGF, the differentiation response was associated with expression of both markers whereas their appearance was retarded or blocked by EGF. TGF alpha, which also interacts with the EGF receptor, gave a similar response to that observed with EGF. These findings functionally distinguish KGF from the EGF family and support the role of KGF in the normal proliferation and differentiation of human epithelial cells.