The transglutaminase 1 enzyme is important for the formation of a cornified cell envelope in terminally differentiating keratinocytes. We show here that it is present in low levels in proliferating foreskin or cultured epidermal cells as an inactive zymogen full length form of 106 kDa, of which >95% is attached to membranes. In terminally differentiating keratinocytes, there is a > or = 100-fold induction of mRNA and protein. In addition to some cytosolic protein, most of the newly expressed protein is attached to membranes, of which about half exist in the zymogen form. Other protein consists of a 67/33/10 kDa complex formed by proteolytic processing at specific sites, and is anchored by way of the 10 kDa fragment. This processed form is very highly active and thus accounts for almost all transglutaminase 1 activity in keratinocytes.