Chemically induced skin carcinomas in mice are a paradigm for epithelial neoplasia, where oncogenic ras mutations precede p53 and INK4a/ARF mutations during the progression toward malignancy. To explore the biological basis for these genetic interactions, we studied cellular responses to oncogenic ras in primary murine keratinocytes. In wild-type keratinocytes, ras induced a cell-cycle arrest that displayed some features of terminal differentiation and was accompanied by increased expression of the p19(ARF), p16(INK4a), and p53 tumor suppressors. In ARF-null keratinocytes, ras was unable to promote cell-cycle arrest, induce differentiation markers, or properly activate p53. Although oncogenic ras produced a substantial increase in both nucleolar and nucleoplasmic p19(ARF), Mdm2 did not relocalize to the nucleolus or to nuclear bodies but remained distributed throughout the nucleoplasm. This result suggests that p19(ARF) can activate p53 without overtly affecting Mdm2 subcellular localization. Nevertheless, like p53-null keratinocytes, ARF-null keratinocytes were transformed by oncogenic ras and rapidly formed carcinomas in vivo. Thus, oncogenic ras can activate the ARF-p53 program to suppress epithelial cell transformation. Disruption of this program may be important during skin carcinogenesis and the development of other carcinomas.