The serpin plasminogen activator inhibitor (PAI) type 2 is expressed in differentiated epidermal keratinocytes. To explore its role in this tissue, we studied the impact of PAI-2 overexpression on epidermal differentiation and skin carcinogenesis. A mouse PAI-2-encoding transgene was targeted to basal epidermis and hair follicles under the control of the bovine keratin type 5 gene promoter. Two mouse lines were established, one of which strongly expressed the transgene and produced elevated levels of PAI-2 in the epidermis. Although it had no manifest impact on cellularity or differentiation of skin or hair follicles, PAI-2 overexpression rendered the mice highly susceptible to skin carcinogenesis induced by a single application of 7,12-dimethylbenz(a)anthracene (initiation) followed by twice weekly applications of 12-O-tetradecanoylphorbol-13-acetate [TPA (promotion)]. In transgenic mice, papillomas could be observed after 3 weeks of promotion; after 8 weeks, 94% (31 of 33) of transgenic mice had developed readily visible papillomas, whereas only 35% (7 of 20) of control mice (transgene-negative littermates) had barely detectable lesions. After 11 weeks, all but 1 (32 of 33) of the transgenic mice had papillomas as compared with only 65% (13 of 20) of control mice. After 11 weeks of promotion, application of TPA was terminated. In control mice, papillomas regressed and eventually disappeared; in transgenic mice, there was continued growth of papillomas, some of which further progressed to carcinomas. In contrast to massive apoptosis in regressing papillomas of control mice, only a few apoptotic cells were detected in transgenic papillomas after the cessation of TPA application. The effect of PAI-2 on papilloma formation did not appear to involve inhibition of the secreted protease urokinase-type plasminogen activator (uPA): PAI-2 accumulated predominantly in cells, and PAI-2 overexpression failed to alleviate a phenotype induced by uPA secretion, as demonstrated by a double transgenic strategy. In addition, in situ hybridization revealed that uPA mRNA is not expressed concomitantly with PAI-2 in developing papillomas. We conclude that overexpression of PAI-2 promotes the development and progression of epidermal papillomas in a manner that does not involve inhibition of its extracellular target protease, uPA, but appears to be related to an inhibition of apoptosis.