Organotypic cultures of human keratinocytes provide a useful model system to study human papillomavirus (HPV)-host cell interactions. In this study, we analyzed organotypic cultures of two HPV type 16 (HPV16) (FK16A and FK16B)- and two HPV18 (FK18A and FK18B)-transfected keratinocyte cell lines through the process of immortalization in vitro. For FK16A and FK18B cells, passages of both mortal cells in their extended life span and subsequent immortal stages were studied. Mortal cells of FK16A and FK18B showed a morphology reminiscent of mild to moderate dysplasia, whereas in their immortal descendants, severely dysplastic features were observed. Immortal FK18A cells were mildly to moderately dysplastic, while FK16B cells were severely dysplastic. The increasing degrees of dysplasia were associated with a decreasing expression of differentiation markers cytokeratin 10 and profilaggrin. All raft cultures expressed E6-E7 mRNAs in the basal layer, while the amount of viral transcripts in the suprabasal cells was in general proportional to the degree of dysplasia. In all cases, E6-E7 transcription and dysplastic features were highly correlated with cellular proliferation, as assessed by Ki-67 (MIB-1) antigen expression. Moreover, high levels of E6-E7 transcription and expression of p21cip1 protein in the basal layer seemed to be mutually exclusive. We conclude that expression of E6-E7 in the basal cells associated with increased proliferation in the absence of detectable p21cip1 protein is apparently necessary but not sufficient for immortalization, or for the loss of terminal differentiation, for which yet to be discovered additional events are required. The model system described in this study provides a valuable tool to analyze alterations in viral transcription regulation during HPV-mediated cell transformation.