Oxygen is an essential micronutrient. Unlike many internal tissues, human epidermis obtains much of its oxygen supply from the atmosphere (21% oxygen), and it ordinarily experiences higher oxygen levels than internal tissues (estimated≈5%). To test whether epidermal cell growth and differentiation depend upon this higher oxygen level, keratinocyte cultures were studied at 21, 5, and 2% oxygen concentrations. Compared to 21% oxygen, culture in 5% had little effect on growth but led to profound suppression of the differentiation program as assessed by expression of differentiation markers and formation of squames in the superficial layers. Culture in 2% oxygen reduced the growth rate as well as stratification and differentiation. In low-oxygen conditions, the cells exhibited increased colony-forming ability, consistent with a lower proportion of differentiated cells, and increased expression of vascular endothelial growth factor and cyclooxygenase-2. Growth in 21% oxygen led to higher levels of glutathione and expression of oxidant-responsive genes. Electrophoretic mobility supershift assay using an involucrin activator protein 1 (AP1) response element sequence revealed altered binding by proteins of the Jun and Fos families in nuclear extracts. The present data thus demonstrate oxygen-dependent differentiation in human keratinocytes, to which altered utilization of AP1 transcriptional response elements may contribute.