The erbB-2 proto-oncogene belongs to a receptor tyrosine kinase family that includes the epidermal growth factor receptor, erbB-2, erbB-3, and erbB- 4. erbB-2 is expressed in basal cells of the squamous epithelia and the outer root sheath of the hair follicles, but its function in epidermal development has not been well studied. To investigate its role in the skin, we created transgenic mice harboring an activated erbB-2 oncogene under the control of the human keratin 14 promoter. The keratin 14 promoter directed its expression to cells in which erbB-2 is normally expressed, whereas the activated receptor gene ensured increased signaling. All transgenic founder mice exhibited extensive and striking skin phenotype, including epidermal hyperplasia, preneoplasia, papilloma, hyperkeratosis, and dyskeratosis. The majority of the hair follicles were replaced by bizarre hyperproliferative intradermal squamous invaginations, whereas the rest of the follicles exhibited severe hyperplasia and disorganization. All but one of the transgenic mice died before or shortly after birth, probably as a consequence of defects in the skin and esophagus. These observations demonstrate that the skin is sensitive to erbB-2 signaling, suggesting an important role for this receptor tyrosine kinase in epidermal growth, differentiation, and hair follicle morphogenesis.