In addition to well-known changes in protein composition, epidermal differentiation is associated with dramatic changes in lipid content. A decrease in phospholipids and triglycerides is accompanied by enrichment in ceramides, cholesterol, and free fatty acids in the stratum corneum. The epidermis demonstrates exceptionally high basal levels of lipid synthesis, and regulates its synthetic activity in response to barrier requirements. Not all epidermal lipids are synthesized in parallel; whereas cholesterol and fatty acids are synthesized immediately after barrier disruption, sphingolipids begin to be synthesized later in the course of barrier homeostasis. In addition, with specific inhibitors of the key regulatory enzymes--3-hydroxy-3-methyl-glutaryl coenzyme A reductase (for cholesterol) and serine palmitoyl transferase (for sphingolipids)--it has been possible to demonstrate conclusively a role for these species in the barrier. Furthermore, barrier function not only regulates lipid synthesis, but also epidermal DNA synthesis, perhaps thereby providing an additional pool of lipid biosynthetic factories. These findings have considerable implications for the pathophysiology of skin diseases associated with abnormal barrier function, such as psoriasis and irritant contact dermatitis.