In recent years the search for new retinoids, safer and more potent than the available compounds, has led to the development of arotinoids. In preliminary clinical trials, arotinoid ethyl ester [(E)-4-[2-(5,6,7,8-tetrahydro-5,5,8,8-tetramethyl-2-naphthalenyl)-1- propenyl]benzoic acid ethyl ester; TTNPB ethyl ester] was found to be highly effective in the treatment of severe and etretinate-resistant dermatoses. Using adult hairless mice, embryonic mouse limb-bud cultures and keratinocyte cultures as experimental models, we have performed morphological, autoradiographic and biochemical studies on the effects of arotinoid ethyl ester on epithelial differentiation in vivo and in vitro. Arotinoid ethyl ester stimulates proliferation of both embryonic and adult mouse epidermis. However, it inhibits the differentiation of embryonic epidermis and enhances that of adult epidermis. Arotinoid ethyl ester induces a decrease in the cyclic AMP content of cholera toxin-stimulated keratinocytes but fails to alter cyclic AMP concentrations in keratinocytes not treated with cholera toxin.