Transgenic mice were developed to explore the role of the erbB2 during epithelial homeostasis and tumorigenesis, through targeted expression of the neu oncogene (neu*). Expression of a neu* cDNA was targeted to the basal layer of skin epidermis as well as other epithelial tissues of transgenic mice via the bovine keratin 5 promoter. Two transgenic founders were obtained that were morphologically distinguishable from non-transgenic littermates by their visibly thickened skin and patchy hair growth by day 3 after birth. The presence of the transgene was confirmed by polymerase chain reaction analysis of tail DNA and immunofluorescence analysis of neu* protein in skin sections. Histological evaluation revealed significant hyperplasia of the follicular and interfollicular epidermis, the abnormal presence of horny material in the dermis and hypodermis, and a dramatic increase in epidermal proliferation. Many areas of the dermis involving this abnormal epithelial proliferation exhibited a squamous cell carcinoma-like appearance. In addition, there was unusual proliferation of the sebaceous glands. One founder died at day 14 and the other at day 20. The latter founder had two papillomas at the time of death. Additional phenotypic changes resulting from the expression of neu* in other tissues included hyperkeratosis in the forestomach and esophagus. In addition, there was a lack of distinction of the cortical-medullary boundaries and an increased rate of cell death in lymphocytes in the thymus. The phenotypic changes in these other tissues correlated with transgene expression. The data suggest that erbB2 signaling has an important role in epidermal proliferation. In addition, the data provide strong support for a role for erbB2 signaling during epidermal carcinogenesis in mouse skin.