Cornification, the terminal differentiation of keratinocytes, is a special form of programmed cell death in the skin. In this article, we report that tumor necrosis factor-related apoptosis-inducing ligand (TRAIL) can induce the expression of the keratinocyte differentiation markers involucrin and type 1 transglutaminase in normal human epidermal keratinocytes. The induction of differentiation occurs mainly under the activation of caspases 3 and 8, and apoptosis can also be triggered. Inhibition of these apoptotic caspases attenuates both apoptosis and differentiation of keratinocytes caused by TRAIL but barely affects the induction of differentiation caused by calcium and phorbol 12-myristate 13-acetate. Differential regulation of extracellular signal-regulated kinase and p38 activation by TRAIL is also observed. Moreover, the degradation of p63 is induced by TRAIL-elicited caspase activation. However, the existence of p63 is essential for the initiation of keratinocyte differentiation by TRAIL because knockdown of ΔNp63 decreases TRAIL-induced differentiation. Taken together, our results suggest that TRAIL can be an inducer of both differentiation and apoptosis in human keratinocytes, and that caspases critically mediate these processes. This study identifies a new role of apoptotic caspases for terminal differentiation of keratinocytes and further elucidates the molecular pathways involved in this unique model of cell death.