During the formation of the mammalian epidermal permeability barrier, lipids are sequestered in the stratum corneum intercellular spaces, transforming from a relatively polar lipid mixture to predominantly nonpolar species. Certain lipid catabolic enzymes, which co-localize with these lipids, may regulate this process. In order to localize the sites within the outer epidermis where polar lipids are catabolized, and their relationship to the alterations in membrane structure that occur in these layers, we compared the biochemical localization of polar lipids, the ultrastructure, and freeze-fracture morphology, as well as the localization of phospholipases within the outer epidermis. Both histochemical staining of frozen sections and biochemical studies of protease- and tape-stripped whole stratum corneum demonstrated small amounts of polar lipids in the stratum compactum, while in contrast, the stratum disjunctum was devoid of both phospholipids and glycosphingolipids. Phospholipase activity was present within lamellar bodies, among secreted lamellar body disks at the granular-cornified layer interface, and within the intercellular spaces of the stratum compactum. Both the depletion of polar lipids from the stratum compactum and deletion of these substances from the stratum disjunctum correlated with sequential changes in membrane structure observed by transmission electron microscopy and freeze-fracture. Thus, a phospholipase-mediated attack on phospholipids (with a parallel assault by other lipid catabolic enzymes on other polar species), may induce both the initial fusion and elongation of lamellar body disks and the subsequent formation of the hydrophobic membrane bilayers found in the mid-to-outer stratum corneum. These studies also may require modification of traditional views of the stratum corneum as a metabolically inert tissue, revealing its intercellular lipid domains to be partially in an active state of flux.