Pilomatricoma consists of the cells differentiating towards hair matrix cells. Immunohistochemical study revealed the deposition of type II collagen in the overlying dermo-epidermal junction (DEJ) of this benign tumor. Proalpha(1)(II) mRNA was detected by RT-PCR in the overlying epidermal layer but not in the dermal layer prepared from the lesional skin of pilomatricoma. The neutral salt-soluble proteins extracted from the tumor of pilomatricoma induced proalpha(1)(II) mRNA in the cultured human keratinocytes but not in the cultured dermal fibroblasts. Bone morphogenetic protein 2 or 4 (BMP2 or 4) was immunohistochemically detected in some shadow cells of pilomatricoma. Recombinant BMP2 and BMP4 were found to induce proalpha(1)(II) mRNA concentration dependently in the cultured human keratinocytes but not in the cultured fibroblasts. Proalpha(1)(II) mRNA induced by BMP2 and in cultured keratinocytes contained exon 2, indicating that the mRNA species is non-chondrogenic type IIA form. The results strongly suggest that BMP2 or 4 expressed in pilomatricoma is responsible for the induction of proalpha(1)(II) collagen mRNA in the overlying epidermal cells resulting in the deposition of type II collagen in the DEJ. When human keratinocytes were cultured on type II collagen substratum in vitro, the cell proliferation was accelerated at the early period of culture but was inhibited at the late period of culture, whereas the cell proliferation was persistently accelerated by type I or IV collagen substratum. Type II collagen deposition in the DEJ may potentially exert profound effects on keratinocyte proliferation and differentiation.