Although the expression and function of CD40 on B lymphocytes has been well studied, the significance of CD40 on non-lymphoid cells such as keratinocytes (KC) is not as well characterized. We demonstrate in this report that CD40 is expressed by virtually all human KC, and that it functions as an important signaling molecule. Flow cytometry of undifferentiated and terminally differentiated KC indicated that both cell types expressed CD40, as determined by binding to monoclonal antibodies and a recombinant CD40 ligand fusion protein; interferon-gamma (IFN-gamma) treatment of KC increased CD40 expression. Cultured KC also expressed 1.5-kb CD40 transcripts. Activation of KC cell surface CD40 using the monoclonal antibody G28.5 resulted in the rapid generation of a 50-kDa tyrosine phosphorylated polypeptide, as well as a dose-dependent increase in the secretion of interleukin-6, a cytokine that has been linked to KC proliferation. KC also co-stimulated a significant T lymphocyte proliferative response to the mitogen phytohemagglutinin that was CD40 dependent. These data indicate that KC constitutively express a low level of functional CD40 and regulate their expression in response to IFN-gamma. These data support the concept that KC, via their expression of CD40, have the capacity to amplify inflammation in the skin by interacting with CD40 ligand-bearing T cells.