Vitamin D3 is produced in the skin. It is metabolized primarily in the liver to the major circulating form 25-hydroxy vitamin D3, [25(OH)D3] which is metabolized in the kidney to produce the biologically active form of the hormone, 1,25-dihydroxy vitamin D3, [1,25(OH)2D3]. The skin not only participates in the production of vitamin D3 but also contains receptors for 1,25(OH)2D3 suggesting a role of this hormone in the growth and differentiation of this tissue. 1,25(OH)2D3 appears to play a role in epidermopoiesis and melanin pigmentation. Recently, using cultures of neonatal human foreskin keratinocytes, we have demonstrated that these cells produce abundant quantities of 1,25(OH)2D3 from 25(OH)D3. The production of 1,25(OH)2D3 varies with the degree of differentiation of keratinocytes and is regulated by exogenous 1,25(OH)2D3. 1,25(OH)2D3 induces differentiation possibly because of its ability to increase intracellular free calcium levels. A tentative model is provided to demonstrate potential mechanisms by which 1,25(OH)2D3-induced changes in intracellular calcium could regulate epidermal differentiation.