Undifferentiated transcription factor-1 (UTF-1) and reduced expression protein-1 (REX-1) are used as markers for the undifferentiated state of pluripotent stem cells. Because no highly specific cytochemical marker for epidermal stem cells has yet been identified, we investigated the expression pattern of these markers in human epidermis and skin tumours by immunohistochemistry and in keratinocyte cell cultures. Both presumed stem cell markers were widely expressed in the epidermis and skin appendages. Distinct expression was found in the matrix cells of the hair shaft. Differentiation of human primary keratinocytes (KC) in vitro strongly downregulated UTF-1 and REX-1 expression. In addition, REX-1 was upregulated in squamous cell carcinomas, indicating a possible role of this transcription factor in malignant tumour formation. Our data point to a role for these proteins not only in maintaining KC stem cell populations, but also in proliferation and differentiation of matrix cells of the shaft and also suprabasal KC.