The human keratinocyte cell line HaCaT expresses essentially all epidermal differentiation markers but exhibits deficiencies in tissue organization as surface transplants in nude mice and even more so in organotypic co-cultures with fibroblasts. Whereas tissue differentiation by normal keratinocytes (NEKs) is regulated by stromal interactions, this mechanism is impaired in HaCaT cells. This regulatory process is initiated by interleukin-1 (IL-1) release in keratinocytes, which induces expression of keratinocyte growth factor (KGF/FGF-7) and granulocyte macrophage-colony stimulating factor (GM-CSF) in fibroblasts. Production and release of IL-1 is very low and, consequently, expression of the fibroblast-derived growth factors KGF/FGF-7 and GM-CSF is absent in HaCaT-fibroblast co-cultures. However, addition of KGF and GMCSF, respectively, is inefficient to improve stratification and differentiation by HaCaT cells due to the low expression of their cognate receptors. More importantly, expression and release of the autocrine keratinocyte growth factor TGF-alpha is dramatically decreased in HaCaT cells. Addition of TGF- alpha or EGF stimulated HaCaT cell proliferation but, even more effectively, suppressed apoptosis, thus facilitating the formation of a regularly stratified epithelium. Furthermore, TGF-alpha enhanced the expression of the receptors for KGF and GM-CSF so that addition of these growth factors, or of their inducer IL-1, further improved epidermal tissue differentiation leading to in vitro skin equivalents comparable with cultures of NEKs. Thus, supplementing TGF-alpha normalized epidermal tissue regeneration by immortal HaCaT keratinocytes and their interaction with stromal cells so that regular skin equivalents are produced as standardized in vitro models.