Beta ig-h3 is an extracellular matrix protein whose expression is highly induced by transforming growth factor (TGF)-beta1. Whereas beta ig-h3 is known to mediate keratinocyte adhesion and migration, its effects on keratinocyte differentiation remain unclear. In the present study, it was demonstrated that expression of both beta ig-h3 and TGF-beta1 was enhanced during keratinocyte differentiation and that expression of the former was strongly induced by that of the latter. This study also asked whether changes in beta-h3 expression would affect keratinocyte differentiation. Indeed, down-regulation of beta ig-h3 by transfection with antisense beta ig-h3 cDNA constructs effectively inhibited keratinocyte differentiation by decreasing the promoter activities and thus expression of involucrin and transglutaminase. The result was an approximately 2-fold increase in mitotic capacity of the cells. Conversely, overexpression of beta ig-h3, either by transfection with beta ig-h3 expression plasmids or by exposure to recombinant beta ig-h3, enhanced keratinocyte differentiation by inhibiting cell proliferation and concomitantly increasing involucrin and transglutaminase expression. Recombinant beta ig-h3 also promoted keratinocyte adhesion through interaction with integrin alpha3beta1. Changes in beta ig-h3 expression did not affect intracellular calcium levels. Subsequent analysis revealed not only induction of Akt phosphorylation by recombinant beta ig-h3 but also blockage of Akt phosphorylation by LY294002, an inhibitor of phosphatidylinositol 3-kinase. Taken together, these findings indicate that enhanced beta ig-h3, induced by enhanced TGF-beta during keratinocyte differentiation, provoked cell differentiation by enhancing involucrin and transglutaminase expression through the integrin alpha3beta1 and phosphatidylinositol 3-kinase/Akt signaling pathway. Lastly, it was observed that beta ig-h3-mediated keratinocyte differentiation was caused by promotion of cell adhesion and not by calcium regulation.