X-linked anhidrotic ectodermal dysplasia (EDA) is characterized by defects in the development of hair, teeth, and sweat glands. We have recently cloned the gene for EDA by positional cloning. The EDA gene encodes a transmembrane protein with a putative role in epithelial mesenchymal interactions. Since EDA could play a role in cell-cell or cell-matrix adhesion, acantholytic skin diseases and several types of non-invasive and invasive skin cancers were studied using in situ hybridization. Because of the observation that the promoter region of the EDA gene contains a binding site for LEF-1, which is involved in the signaling through E-cadherin/beta catenin complex, we compared the expression of EDA with immunolocalization for E-cadherin (E-CD). EDA expression during hair growth cycle, in benign adnexal tumors, and neuroectoderm-derived nevus cells was also examined. Our findings indicate that EDA expression is less abundant in malignant tumors, including basal and squamous cell carcinomas and melanoma, and in acantholytic keratinocytes compared to normal epidermis. The reduction in expression also coincides with diminished E-CD staining in all malignant cell types and in acantholytic cells. Our results suggest that EDA protein functions in the regulation of epithelial cell contacts and that it may be associated with the E-CD signaling pathway.