Mice lacking the ubiquitously expressed lysosomal cysteine protease cathepsin L, show a complex skin phenotype consisting of periodic hair loss and epidermal hyperplasia with hyperproliferation of basal epidermal keratinocytes, acanthosis and hyperkeratosis. The recently identified human cathepsin L-like enzyme cathepsin V, which is also termed cathepsin L2, is specifically expressed in cornea, testis, thymus, and epidermis. To date, in mice no cathepsin V orthologue with this typical expression pattern has been identified. Since cathepsin V has about 75% protein sequence identity to murine cathepsin L, we hypothesized that transgenic, keratinocyte-specific expression of cathepsin V in cathepsin L knockout mice might rescue the skin and hair phenotype. Thus, we generated a transgenic mouse line expressing cathepsin V under the control of the human keratin 14 promoter, which mimics the genuine cathepsin V expression pattern in human skin, by directing it to basal epidermal keratinocytes and the outer root sheath of hair follicles. Subsequently, transgenic mice were crossed with congenic cathepsin L knockout animals. The resulting mice show normalization of epidermal proliferation and normal epidermal thickness as well as rescue of the hair phenotype. These findings provide evidence for keratinocyte-specific pivotal functions of cathepsin L-like proteolytic activities in maintenance of epidermis and hair follicles and suggest, that cathepsin V may perform similar functions in human skin.