The oncoproteins E6 and E7 of human papillomavirus type 38 (HPV38) display several transforming activities in vitro, including immortalization of primary human keratinocytes. To evaluate the oncogenic activities of the viral proteins in an in vivo model, we generated transgenic mice expressing HPV38 E6 and E7 under the control of the bovine homologue of the human keratin 10 (K10) promoter. Two distinct lines of HPV38 E6/E7-expressing transgenic mice that express the viral genes at different levels were obtained. In both lines, HPV38 E6 and E7 induced cellular proliferation, hyperplasia, and dysplasia in the epidermis. The rate of occurrence of these events was proportional to the levels of HPV38 E6 and E7 expression in the two transgenic lines. Exposure of the epidermis of nontransgenic mice to UV led to p21WAF1 accumulation and cell cycle arrest. In contrast, keratinocytes from transgenic mice continued to proliferate and were not positive for p21WAF1, indicating that cell cycle checkpoints are altered in keratinocytes expressing the viral genes. Although the HPV38 E6/E7-expressing transgenic mice did not develop spontaneous tumors during their life span, two-stage carcinogen treatment led to a high incidence of papillomas, keratoacanthomas, and squamous-cell carcinomas in HPV38 mice compared with nontransgenic animals. Together, these data show that HPV38 E6 and E7 display transforming properties in vivo, providing further support for the role of HPV38 in carcinogenesis.