Terminal differentiation of mouse epidermal cells in primary culture was found to be regulated by 1 alpha,25-dihydroxyvitamin D3 (1 alpha,25(OH)2D3), the hormonal form of vitamin D3 produced by sequential hydroxylations in the liver and kidney. Epidermal differentiation was stimulated dose dependently by 1 alpha,25(OH)2D3 at concentrations of 0.12 nM or more. In the presence of the vitamin, stratified foci increased in number and size and contiguous foci coalesced. Basal cells in the treated cultures decreased sharply and underwent differentiation into squamous and enucleated cells which sloughed off into the medium during cultivation. The size and density of the cells became larger and lighter during the course of differentiation. 1 alpha,25(OH)2D3 markedly stimulated formation of a cornified envelope, a structure with chemically stable cross-links formed beneath the plasma membrane. Of several derivatives of vitamin D3 examined, 1 alpha,25(OH)2D3 was the most potent in inducing epidermal differentiation. Stimulation of epidermal differentiation was also observed in low calcium medium. DNA synthesis was inhibited dose dependently by 1 alpha,25(OH)2D3. A specific receptor for 1 alpha,25(OH)2D3 was found in the cytosol fraction of the epidermal cells. Scatchard plot analysis revealed that the receptor has an apparent dissociation constant (Kd value) of 54 pM and maximum binding value (Nmax) of 43 fmol/mg protein. The specificity of the receptor was demonstrated by analog competition in the following order: 1 alpha,25(OH)2D3 much greater than 25-hydroxyvitamin D3 greater than 1 alpha-hydroxyvitamin D3 greater than 24R,25-dihydroxyvitamin D3.