Cultures of human epidermal keratinocytes provide a useful experimental model with which to study the factors that regulate cell proliferation and terminal differentiation. One situation that is known to trigger premature terminal differentiation is suspension culture, when keratinocytes are deprived of substratum and intercellular contact. We have now investigated whether area of substratum contact, and hence cell shape, can regulate terminal differentiation. Keratinocytes were grown on circular adhesive islands that prevented cell-cell contact. By varying island area we could vary cell shape from fully spread to almost spherical. We found that when substratum contact was restricted, DNA synthesis was inhibited and expression of involucrin, a marker of terminal differentiation, was stimulated. Inhibition of proliferation was not a sufficient stimulus for involucrin synthesis in fully spread cells. When DNA synthesis and involucrin expression were plotted against contact area, classic dose-response curves were obtained. Thus cell shape acts as a signal for the terminal differentiation of keratinocytes in culture.