To determine whether a functional type II receptor of transforming growth factor β (TGF-β) is required to mediate the growth inhibitory effect of TGF-β on the skin in vivo, we have generated transgenic mice that overexpress a dominant negative-type II TGF-β receptor (ΔβRII) in the epidermis. The ΔβRII mice exhibited a thickened and wrinkled skin, and histologically the epidermis was markedly hyperplastic and hyperkeratotic. In vivo labeling with BrdUrd showed a 2.5-fold increase in the labeling index over controls, with labeled nuclei occurring in both basal and suprabasal cells of transgenic epidermis. In heterozygotes, this skin phenotype gradually diminished, and by 10–14 days after birth the transgenic mice were indistinguishable from their normal siblings. However, when F₁ mice were mated to homozygosity, perinatal lethality occurred due to the severe hyperkeratotic phenotype, which restricted movement. Cultured primary keratinocytes from ΔβRII mice also exhibited an increased rate of growth in comparison with nontransgenic controls, and were resistant to TGF-β-induced growth inhibition. These data document the role of the type II TGF-β receptor in mediating TGF-β-induced growth inhibition of the epidermis in vivo and in maintenance of epidermal homeostasis.