Formation of a well structured epidermis strictly depends on a tight balance between proliferation and differentiation. Accordingly, telomerase, which is restricted to proliferating cells, is downregulated with differentiation. It is unclear, however, whether this inhibition is essential to or only a consequence of the differentiation process. By studying different variants of the HaCaT skin keratinocytes we now show that constitutive overexpression of human telomerase reverse transcriptase (hTERT) in HaCaT-TERT cells (lacking its own differentiation-sensitive promoter) and constitutive expression of the c-myc gene in HaCaT-myc cells caused increased proliferation in conventional cultures; however, this proliferative advantage was not maintained in tissue-like organotypic cocultures. Despite reduced stratification, HaCaT-myc cells were still able to develop a fully differentiated epithelium. HaCaT-TERT cultures, on the other hand, expressed all markers of early but not of terminal differentiation. The failure to differentiate terminally was observed in hTERT mass cultures and individual clones and correlated with an intense nuclear hTERT staining of the uppermost cells of the HaCaT-TERT epithelia. Thus, our data suggest that constitutive overexpression of hTERT does not interfere with epidermal differentiation per se but blocks the terminal stage of differentiation and therefore indicates that hTERT/telomerase plays an active part in the regulatory pathway of epidermal differentiation.