Recent studies have linked epidermal cholesterol synthesis with maintenance of the permeability barrier. To assess directly the importance of cholesterol synthesis, we applied lovastatin, a potent inhibitor of cholesterol synthesis, to hairless mouse skin. Transepidermal water loss (TEWL) began to increase after four to six daily applications. Co-application of cholesterol blocked the expected increase in TEWL, demonstrating the importance of cholesterol for development of the lesion. The histology of lovastatin-treated skin revealed epidermal hyperplasia, accompanied by accelerated DNA synthesis. Whereas cholesterol synthesis initially was reduced in lovastatin-treated epidermis, with further treatment cholesterol synthesis normalized, while fatty acid synthesis accelerated greatly. Although the total free sterol content of lovastatin-treated epidermis remained normal, the fatty acid content increased coincident with barrier disruption. Finally, morphologic abnormalities of both lamellar body structure and their deposited, intercellular contents occurred coincident with the emerging biochemical abnormalities. Thus, the abnormal barrier function in this model can be ascribed to an initial inhibition of epidermal sterol synthesis followed by an alteration in cholesterol and fatty acid synthesis, leading to an imbalance in stratum corneum lipid composition and abnormal membrane bilayer structure.