Activator protein one (AP1) (jun/fos) factors comprise a family of transcriptional regulators (c-jun, junB, junD, c-fos, FosB, Fra-1 and Fra-2) that are key controllers of epidermal keratinocyte survival and differentiation, and are important drivers of cancer development. Understanding the role of these factors in epidermis is complicated by the fact that each member is expressed in defined cell layers during epidermal differentiation, and because AP1 factors regulate competing processes (that is, proliferation, apoptosis and differentiation). We have proposed that AP1 factors function differently in basal versus suprabasal epidermis. To test this, we inactivated suprabasal AP1 factor function in mouse epidermis by targeted expression of dominant-negative c-jun (TAM67), which inactivates function of all AP1 factors. This produces increased basal keratinocyte proliferation, delayed differentiation and extensive hyperkeratosis. These findings contrast with previous studies showing that basal layer AP1 factor inactivation does not perturb resting epidermis. It is interesting that in spite of extensive keratinocyte hyperproliferation, susceptibility to carcinogen-dependent tumor induction is markedly attenuated. These novel observations strongly suggest that AP1 factors have distinct roles in the basal versus suprabasal epidermis, confirm that AP1 factor function is required for normal terminal differentiation, and suggest that AP1 factors have a different role in normal epidermis versus cancer progression.