Retinoic acid (RA) induces tissue transglutaminase (TGASE) and inhibits terminal differentiation induced either by calcium ion or by the tumor promoter 12-O-tetradecanoylphorbol-13-acetate (TPA) in primary mouse epidermal cells in culture. The relevance of these effects on cultured cells to the antipromoting action of RA was investigated in female BALB/c and CD-1 mice in vivo. Tissue TGASE was distinguished from epidermal TGASE on the basis of different thermolability at pH 9 or elution from the anion exchanger Mono Q. After topical application of 3 to 5 μg (10 to 17 nmol) of RA to the shaved back skin, the specific activity of tissue TGASE increased up to 30-fold primarily in the basal cell fraction of Percoll-separated epidermal cells. Enzyme activity returned to basal levels by 7 days. Treatment with TPA (10 μg or 17 nmol/mouse) induced an increase in epidermal TGASE which reached a maximum at 12 h after application, primarily in suprabasal cells. RA applied 1 h before TPA caused no reduction of TPA-induced epidermal TGASE, but the increase in tissue TGASE due to RA was markedly inhibited by TPA. The effects of TPA and RA on TGASE activities in primary epidermal cells in culture were similar to those in vivo except that RA reduced the induction of epidermal TGASE by TPA. In culture the induction of epidermal TGASE by TPA was independent of Ca2+ concentration in the medium above 0.03 mm, but cornified envelope formation was markedly enhanced by Ca2+ above the level required for maintaining a basal cell population (0.03 to 0.05 mm). The TPA-induced formation of cornified envelope in the presence of elevated Ca2+ was completely inhibited by RA if cells were pretreated with RA for 24 h. Our results are consistent with RA causing a reprogramming of epidermal cells that alters their response to differentiation stimuli.