p21 plays a dual role in keratinocyte growth and differentiation control. It restricts the number of keratinocyte stem cell populations while inhibiting the later stages of differentiation independently of the cell cycle. The molecular/biochemical mechanism for the differentiation suppressive function of p21 is unknown. Here we show that elevated p21 expression leads to activation of MAPK family members in a keratinocyte-specific and cell cycle-independent manner, and up-regulation of MAPK activity can explain the inhibitory effects of p21 on differentiation. p21 induces transcription of several genes with MAPK activation potential. Although several of these genes are induced by p21 in a MAPK-dependent manner, expression of IGF-I is induced upstream of MAPK activation. IGF-I stimulation is by itself sufficient to cause MAPK activation and inhibit differentiation and suppression of IGF-I signaling by knock down of the cognate receptor (IGF-R1), diminishing the ability of p21 to activate MAPK and suppress differentiation. Thus, in keratinocytes, the ability of p21 to suppress differentiation can be explained by cell type-specific activation of the MAPK cascade by transcriptional up-regulation of the IGF-I gene.