Dendritic epidermal T cells (DETCs) are a highly specialized population of gammadelta T cells that resides in the murine skin and participates in wound healing and tumor surveillance. Despite the expression of other stimulatory receptors on these cells, mechanisms involving activation have focused primarily on the invariant Vgamma3-Vdelta1 TCR expressed by DETCs. All DETCs also express the activating NKG2D receptor, but the role of NKG2D in DETC activation remains unclear, as does the identity of NKG2D ligands that are functionally expressed in the skin. In this study, we document the cloning of an NKG2D ligand H60c that is expressed specifically in the skin and in cultured keratinocytes and demonstrate its role in the activation of DETCs and NK cells. The ligand is unique among NKG2D ligands in being up-regulated in cultured keratinocytes, and its interaction with NKG2D is essential for DETC activation. Importantly, it is shown that engagement of NKG2D is not sufficient to activate DETCs, but instead provides a costimulatory signal that is nevertheless essential for activating DETCs in response to stimulation with keratinocytes.