The helix-loop-helix transcription factor Id1 (inhibitor of differentiation/inhibitor of DNA binding) functions as an inhibitor of differentiation. We have examined Id1 gene expression in cultured keratinocytes in punch biopsies from psoriatic involved and uninvolved skin, and in skin specimens from normal individuals. Id1 mRNA expression was measured with an RNase protection assay and with Northern blot. Id1 immunoreactivity was determined in skin biopsies by immunofluorescence using a polyclonal antibody directed against the Id1 protein. In cultured keratinocytes, the expression of Id1 mRNA was strongest in small cells with high proliferative potential, whereas in large cells, which are terminally differentiated, the expression was low. Expression of the Id1 mRNA in psoriatic involved skin (n = 9) was significantly elevated compared to uninvolved skin from the same patient (n = 5) and to skin from normal controls (n = 9). Id1 immunoreactivity was intranuclear throughout all the layers in psoriatic involved epidermis, except in the stratum corneum, while no immunoreactivity was detected in uninvolved epidermis. In normal controls, cytoplasmatic Id1 immunoreactivity was detected in the basal layer in epidermis obtained from newborns, while no immunoreactivity was detected in epidermis obtained from the adults in the control group. We conclude that Id1 is expressed in cells with high proliferative potential, and is downregulated in cells that undergo terminal differentiation. Along with the overexpression of the Id1 gene in psoriatic involved skin, these observations suggest that Id1 is involved in the process of differentiation of keratinocytes seen in normal skin and that the Id1 pathway is activated in psoriasis.