Primary cultures of mouse keratinocytes maintain a basal cell phenotype in 0.05 mM Ca2+ medium, while culture in 1.4 mM Ca2+ results in terminal differentiation and inhibition of DNA synthesis. Induction of differentiation by Ca2+ results in a 10- to 20-fold increase in the expression of transforming growth factor-beta 2 (TGF-beta 2) mRNA and peptide, but a decrease in the expression of TGF-beta 1. In contrast, binding and cross-linking analyses show that the number of available surface 80 kilodalton (kDa) and 65 kDa TGF-beta receptor types decrease during differentiation. However, a mild acid wash significantly increases the number of available receptor sites on the differentiated keratinocytes, indicating that the TGF-beta receptors are unavailable for binding due to masking by endogenous ligand. A significant level of TGF-beta 2 secretion and receptor binding occur before the decrease in DNA synthesis, suggesting that the inhibition of DNA synthesis associated with differentiation of keratinocytes is mediated through the production and autocrine action of TGF-beta 2.