The concentration of extracellular calcium appears critical to the initiation of keratinocyte differentiation. Prostaglandins (PGs) have also been implicated in cell differentiation. Consequently, the participation of endogenous eicosanoids in calcium-induced differentiation of human keratinocytes was evaluated in vitro. Our results demonstrate that: (1) exogenously introduced PGE2, the major keratinocyte-derived eicosanoid, but not prostaglandin I2 (PGI2) or its stable metabolite 6-keto-PGF1 alpha, enhances calcium-induced cornified envelope formation, an established marker of keratinocyte differentiation; (2) increasing extracellular calcium increased endogenous PGE2 synthesis by cultured keratinocytes; (3) blocking endogenous PGE2 synthesis with indomethacin significantly suppresses calcium-induced formation of the cornified envelope; and (4) adding back PGE2 to indomethacin-treated keratinocytes is able to re-establish the control level of cornified envelope formation following stimulation by calcium. These data document the participation of endogenously generated PGE2 in the modulation of calcium-induced differentiation by human keratinocytes.