The purpose of this study was to characterize stromal-epithelial interactions that result in induction of protease gene expression in squamous cell carcinoma of the skin. Coculture of the human squamous cell carcinoma cell line II4 with primary human foreskin fibroblasts was observed to induce mRNA expression of urokinase-type plasminogen activator (uPa), matrilysin, 92-kDa type IV collagenase, and c-ets, a transcriptional activator of several genes within the serine and matrix metalloprotease families. uPA and c-ets induction were localized to the fibroblast cell population. uPa induction was found to be dependent upon cell-cell contact with the tumor cell population, whereas c-ets induction was due to a combination of cell-cell contact and a tumor cell-derived soluble factor. In contrast, matrilysin induction localized to the tumor cells and was shown by Northern and Western analyses to occur in response to a fibroblast-derived soluble factor. These data demonstrate that both paracrine factors and cell-cell contact between stromal fibroblasts and epithelial tumor cells can influence protease gene expression.