Cutaneous sensory innervation was studied in transgenic mice overexpressing insulin-like growth factor II using a keratin promoter. The skin area of these animals is enlarged providing increased target for sensory neurons. L4 dorsal root ganglion cell counts revealed that the total number of sensory neurons was the same in transgenics as control animals. Levels of nerve growth factor per unit weight of skin were also unchanged. The cutaneous nerves of the hindlimb were immunostained with the pan-neuronal marker PGP 9.5 in transgenic and control mice at postnatal day 0 and 21. The innervation in transgenic mice was markedly reduced, particularly in superficial dermis and epidermis and in some areas innervation was completely absent. The effect was greatest in distal skin regions and increased with age. Since insulin-like growth factor II has been reported to be a sensory neurotrophic factor, its effect on neurite outgrowth was tested on embryonic day 14 and 18 mouse lumbar dorsal root ganglion explants in culture. Under these conditions insulin-like growth factor II (5-100 ng/ml) did not have strong growth promoting activity and at embryonic day 18, in the presence of 5-10 ng/ml nerve growth factor, neurite outgrowth was suppressed by insulin-like growth factor II. The results show that increased skin target and availability of nerve growth factor per se do not alter the number of innervating sensory neurons. However, reduced sensory terminal arborization and skin hypoinnervation does occur in the presence of excess insulin-like growth factor-II. It is possible that insulin-like growth factor-II inhibits terminal axon growth directly via receptors on sensory neurons or peripheral glia.