A cDNA library was constructed from polyadenylated RNA present in squamous differentiated rabbit tracheal epithelial cells. Screening of the cDNA library was aimed at identifying RNAs that were abundant in squamous cells and expressed at low levels in undifferentiated cells. Two different recombinants were obtained containing inserts, 0.86 and 0.77 kilobases (kb) in size, that hybridized to mRNAs 1.0 and 1.25 kb in length. These RNAs were present at approximately 50-fold higher levels in squamous cells than in proliferative or confluent retinoic acid-treated cells. The increase in the levels of the 1.0- and 1.25-kb RNAs correlated closely with the onset of squamous differentiation and was not related to induction of terminal cell division. Treatment of rabbit tracheal epithelial cells with transforming growth factor β, which induces squamous differentiation in these cells, also resulted in elevated levels of the 1.0- and 1.25-kb RNAs. The increased levels of these RNAs in squamous cells appeared to a large extent to be regulated at a posttranscriptional level. Retinoic acid not only inhibited the increase in the levels of the 1.0- and 1.25-kb RNAs but also reversed the expression of these RNAs in squamous cells. These results suggests that retinoic acid affects, directly or indirectly, molecular events that induce alterations in the posttranscriptional processing of the transcripts corresponding to the 1.0- and 1.25-kb RNAs.