In this study, we identify and characterize a novel gene, CL-20, that encodes a 17.8-kDa protein with sequence and structural similarity to the growth arrest-specific gene gas3/peripheral myelin protein gene PMP22. The CL-20 protein exhibits a 43% identity with PMP22. The positions of the four lipophilic domains and the N-glycosylation site of PMP22 are conserved in CL- 20, suggesting that it also is an integral membrane glycoprotein. The CL-20 gene is located on human chromosome 12 rather than 17 and encodes a 2.8- kilobase mRNA instead of 1.7-kilobase mRNA. These observations indicate that the CL-20 gene is related to but distinct from PMP22. In contrast to PMP22, CL-20 mRNA and protein are induced during squamous differentiation of rabbit tracheal epithelial cells in vitro, and Northern blot analysis and in situ hybridization demonstrated that CL-20 mRNA is most abundant in squamous epithelia. These results indicate that the high expression of CL-20 is closely correlated with squamous differentiation. The differences in tissue- specific expression and regulation between CL-20 and PMP22 suggest different roles for these two proteins. Retinoids, which inhibit squamous differentiation, repress the induction of CL-20. The retinoic acid receptor- selective retinoid SRI-6751-84 is the most effective in suppressing CL-20, suggesting that the activation of the retinoic acid receptor signaling pathway is important in this suppression.