Essential fatty acids are absolutely necessary for maintaining the proper condition of the water barrier (stratum compactum) in the skin. Even direct topical application of linoleic acid or any other Z,Z-(n-6, n-9)-fatty acid to the skin restores the barrier in essential fatty acid-deficient animals. In order to investigate the mechanism by which these polyunsaturated fatty acids exert their activity, radioactively labelled fatty acids were applied to the skin of the live animal and the epidermal lipids were analysed after 1-4 days. Much radioactivity was incorporated into two peculiar lipids, viz. acyl ceramide and acyl acid, which are characteristic of the barrier, in which linoleate was esterified to the end-position of very-long-chain (C30-34) unsaturated omega-hydroxy fatty acids. Strong evidence was obtained which showed that these lipids carry linoleate into the barrier layer where it is converted, probably by lipoxygenase(s), into a series of peroxidated lipids. The lipoxygenase inhibitor, eicosatetraynoic acid, prevents both oxygenation of the polyunsaturated fatty acid and the formation of a healthy skin. This peroxidation may supply the mediators which induce the proper differentiation of the epidermal cells into an effective stratum compactum and a horny layer.