We studied the expression and regulation of TIMP-3, a recently cloned member of the tissue inhibitor of the metalloproteinase family, during human fetal development and in various human tissues, with emphasis on epithelial structures. Expression of TIMP-3 mRNA was detected by in situ hybridization in developing bone, kidney, and various mesenchymal structures. At 16 weeks of gestation, ectoderm-derived cells of hair germs expressed TIMP-3 mRNA, and beginning from the twentieth week consistent expression was detected in epithelial outer root sheath cells of growing hair follicles. In normal adult human skin, expression of TIMP-3 mRNA was limited to hair follicles, starting at the early anagen (growing) phase and vanishing at the catagen (regressing) phase. TIMP-3 mRNA was not detected in benign hair follicle-derived tumors but was present in tumor cells of infiltrative basal cell carcinomas and in surrounding stromal cells in squamous cell carcinomas. Human primary keratinocytes in culture expressed TIMP-3 mRNAs, the levels of which were upregulated by transforming growth factor-beta (TGF-beta), whereas interleukin-1beta (IL-1beta) and tumor necrosis factor-alpha (TNF-alpha) had no effect. Our results suggest a role for TIMP-3 in connective tissue remodeling during fetal development, hair growth cycle, and cancer progression.