Using a mouse skin tumor model, we reported previously that cyclooxygenase-2 (COX-2) deficiency reduced papilloma formation. However, this model did not differentiate between the effects of systemic COX-2-deficiency and keratinocyte-specific COX-2 deficiency on tumor formation. To determine whether keratinocyte-specific COX-2 deficiency reduced papilloma formation, v-H- ras -transformed COX-2+/+ and COX-2−/− keratinocytes were grafted onto nude mice and tumor development was compared. Transformed COX-2+/+ and COX-2−/− keratinocytes expressed similar levels of H-ras, epidermal growth factor receptor and phospho-extracellular signal-regulated kinase1/2 in vitro ; and COX-2-deficiency did not reduce uninfected or v-H- ras infected keratinocyte replication. In contrast, tumors arising from grafted transformed COX-2+/+ and COX-2−/− keratinocytes expressed similar levels of H-ras, but COX-2 deficiency reduced phospho-extracellular signal-regulated kinase 1/2 and epidermal growth factor receptor levels 50–60% and tumor volume by 80% at 3 weeks. Two factors appeared to account for the reduced papilloma size. First, papillomas derived from COX-2−/− keratinocytes showed about 70% decreased proliferation, as measured by bromodeoxyuridine incorporation, compared with papillomas derived from COX-2+/+ keratinocytes. Second, keratin 1 immunostaining of papillomas indicated that COX-2−/− keratinocytes prematurely initiated terminal differentiation. Differences in the levels of apoptosis and vascularization did not appear to be contributing factors as their levels were similar in tumors derived from COX-2−/− and COX-2+/+ keratinocytes. Overall, the data are in agreement with our previous observations that decreased papilloma number and size on COX-2−/− mice resulted from reduced keratinocyte proliferation and accelerated keratinocyte differentiation. Furthermore, the data indicate that deficiency/inhibition of COX-2 in the initiated keratinocyte is an important determinant of papilloma forming ability.