Caffeic acid phenethyl ester (CAPE) was evaluated for its potential in regulating keratinocyte proliferation. CAPE inhibited the proliferation of SV40 transformed keratinocytes (Z114) in a concentration- and time-dependent manner. Inhibition by CAPE was seen with 0.5 to 5.0 micrograms/ml at 48 h. Cell toxicity was observed at 10 micrograms/ml by changes in morphology and decreased viability. Pretreatment of Z114 cells with CAPE significantly prevented the full induction of ornithine decarboxylase (ODC) by epidermal growth factor (EGF) in a concentration- and time-dependent manner. Inhibition was observed with a concentration of CAPE as low as 1 microgram/ml, and complete inhibition of ODC induction by EGF occurred at 5 micrograms/ml. Northern analysis showed that treatment of cells with CAPE for 24 h suppressed EGF induction of ODC gene expression. Incubation of Z114 cells with CAPE for 24 h resulted in a concentration-dependent decrease in EGF binding and a 30% reduction in the EGF induced autophosphorylation of the EGF receptor. CAPE decreased both membranous and cytosolic PKC activity in a concentration- and time-dependent manner. Because significant inhibition of keratinocyte proliferation occurred at concentrations of CAPE that interfered with PKC activity and EGF signal transduction but did not cause overt toxicity, CAPE may prove useful for the treatment of hyperproliferative skin diseases.