Terminal differentiation of human skin involves the formation of an insoluble cross-linked protein envelope (CLE), which functions as an external barrier. To characterize terminal differentiation in the skin disease psoriasis, we have measured 1) membrane-associated transglutaminase (mTGase) activity, the rate limiting enzyme in the formation of CLE, and 2) the number of CLE in biopsies from normal and psoriatic skin. mTGase activity was increased 5-fold (p less than 0.0001) in psoriatic versus normal skin. Kinetic analysis revealed that the increased activity was due to an elevation in the Vmax of the enzyme. In addition, the number of CLE was 10-fold greater in psoriatic compared to normal skin. The increase in mTGase and CLE in psoriasis is in contrast to the decrease in other markers of terminal differentiation in skin, such as synthesis of specific intermediate filaments, observed in this disease.