1,25-Dihydroxyvitamin D(3), thought to be a physiological regulator of epidermal keratinocyte growth and differentiation, also elicits the complete differentiative program in vitro, with expression of various genes/proteins characteristic of both early and late differentiation. 1,25-Dihydroxyvitamin D(3) functions by interacting with an intracellular receptor that binds to DNA at vitamin D response elements (VDRE) thereby affecting transcription. 1,25-Dihydroxyvitamin D(3) has been demonstrated to alter the expression of several enzymes involved in signal transduction, and presumably this is the mechanism through which the hormone regulates differentiation. It has recently been shown that 1,25-dihydroxyvitamin D(3) specifically increases the expression/activity of phospholipase D-1, an enzyme that hydrolyzes phospholipids to generate lipid messengers, such as diacylglycerol (DAG). DAG, in turn, is known to activate several members of the protein kinase C (PKC) family. It has been proposed that this signaling pathway mediates late differentiation events in epidermal keratinocytes. In this article the data supporting a role for PKC and phospholipase D in keratinocyte differentiation, as well as in the pathogenesis of skin diseases, are reviewed and a model is proposed for the signaling pathways that regulate this process upon exposure to 1,25-dihydroxyvitamin D(3).