Keratinocyte growth factor (KGF), a recently discovered 18.9 kD member of the fibroblast growth factor family has been shown to selectively induce keratinocyte proliferation and differentiation in tissue culture. To explore its potential stimulating keratinocyte growth and differentiation in vivo, we analyzed for the influence of KGF on epithelial derived elements within a wound created through the cartilage on the rabbit ear. KGF accelerated reepithelialization (p = 0.004) and increased the thickness of the epithelium (p = 0.0005) when 4-40 micrograms/cm2 recombinant KGF was added at the time of wounding. The regenerating epidermis showed normal differentiation as detected by cytokeratin immunostaining. Remarkably, however, KGF stimulated proliferation and differentiation of early progenitor cells within hair follicles and sebaceous glands in the wound bed and adjacent dermis. There was a transient but highly significant increase in specific labeling of cycling cells in both basal and suprabasal layers that extended into the spinous layer of the regenerating epidermis. As an indication of specificity, the inflammatory cells and fibroblasts within the wound were not influenced by KGF. The results indicate that KGF is unique in its ability to accelerate reepithelialization and dermal regeneration by targeting multiple epithelial elements within the skin. These results suggest that KGF may induce specific epithelial progenitor cell lineages within the skin to proliferate and differentiate, and thus may be a critical determinant of regeneration of skin. Furthermore, these findings illustrate the potential capacity of this system to analyze epithelial differentiation programs and disorders of epidermis, dermal glandular elements, and hair follicles.