Immune reactions in the gut are associated with increased epithelial cell proliferation. Here we have studied the role of keratinocyte growth factor (KGF; FGF7) and transforming growth factor-alpha (TGF-alpha) in the epithelial cell hyperplasia seen in explants of fetal human small intestine after activation of lamina propria T cells with the superantigen Staphylococcus aureus enterotoxin B (SEB). After the addition of SEB to the explants there is a 10-fold increase in KGF mRNA by 72 h of culture. KGF transcripts were abundant in the lamina propria using in situ hybridization and the culture supernatants contained elevated amounts of KGF protein. SEB had no direct effect on KGF mRNA and protein production by cultured lamina propria mesenchymal cells, but both were upregulated by TNF-alpha. Accompanying the increase in KGF there was also an increase in TGF-alpha precursor proteins in the culture supernatants and the phosphorylated form of the EGFR receptor was also detected in the tissue. Increased TGF-alpha precursor proteins were also detected in the supernatants of control explants stimulated with KGF alone. The direct addition of KGF and TGF-alpha enhanced epithelial cell proliferation and antibodies against KGF and TGF-alpha partially inhibited SEB-induced crypt hyperplasia. These results suggest molecular cross-talk between the KGF/KGFR and the TGF-alpha/EGFR in immune-mediated crypt cell hyperplasia.