The protein product of the c-yes proto-oncogene, p62c-yes, is highly expressed in a variety of mammalian cell types, including neurons, spermatozoa, platelets, and epithelial cells. In order to understand the function of p62c-yes in epithelial cells, the expression and localization of p62c-yes was studied in cultured human epidermal keratinocytes and in normal, hyperplastic, and neoplastic human epidermis. Human keratinocytes in culture produce a single 4kb c-yes mRNA and a 62kd protein product, p62c-yes, which is active as a protein tyrosine kinase. Using affinity-purified antibodies generated to the amino-terminus of the human c-yes protein, the expression of p62c-yes was localized to keratinocytes in the basal epidermal layer of normal neonatal and adult epidermis. There was a marked reduction in expression of p62c-yes by suprabasal keratinocytes undergoing progressive differentiation. By immunofluorescence microscopy, p62c-yes was localized to the plasma membrane and to a perinuclear cytoplasmic area in cultured keratinocytes. The apparent association of p62c-yes with plasma membranes was particularly evident in suprabasal keratinocytes from hyperplastic epidermis. Neoplastic keratinocytes in basal cell carcinomas showed a marked reduction in p62c-yes expression compared to normal basal keratinocytes in epidermis or to proliferating cultured keratinocytes. Thus the expression of p62c-yes by one epithelial cell type, the keratinocyte, is altered by cellular differentiation and neoplastic transformation. Keratinocytes provide a normal epithelial cell model in which the biochemical function of p62c-yes can be studied.