Terminal differentiation defines cells that permanently exit the cell cycle in the process of specialization. Under some circumstances, however, this process is reversed as demonstrated by the ability of differentiated keratinocytes to form hair bearing skin epithelia when transplanted onto a suitable environment. To gain insights into the mechanism of reversion of keratinocyte differentiation, a well characterized culture of mouse keratinocytes, in which calcium (Ca2+) concentrations above 0.1 mM induce differentiation was used. A low Ca2+ switch in differentiated cultures triggered culture-wide morphological and biochemical changes indicated by re-initiation of proliferation, de-repression of cyclin D1, and acquisition of basal cell-like characteristics. Retroviral labeling of differentiated cultures ruled against the possibility of expansion of a small population of Ca2+-resistant keratinocytes following the low Ca2+ switch. The use of selective inhibitors of signaling pathways, suggested a requirement for protein kinase D (PKD) and mitogen activated protein kinases (MAPK). Inhibition of keratinocyte reversion by Goedecke 6979, an inhibitor of PKD and protein kinase C (PKC)-Α, but not with GF10923X, a general inhibitor of PKCs, suggested PKC-independent PKD activation. PKD phosphorylation/ activation followed complex kinetics with a biphasic transient phosphorylation within the first 6 hrs followed by a sustained and progressive phosphorylation beginning at 24 hrs after the low Ca2+ switch. Despite expression of all three PKD isoforms in keratinocytes, specific knockdown of PKD1 by RNA interference or over-expression of dominant negative form of PKD1 blocked re-initiation of proliferation and morphological reversion in differentiated cultures, indicating an essential and non-redundant role for PKD1 in this process. Furthermore, analysis of ERK1/2 activity in reverted cultures indicated a biphasic pattern of ERK1/2 phosphorylation consistent with that of PKD. Suppression of ERK1/2 phosphorylation in keratinocytes over-expressing a dominant negative form of PKD directly correlated with the inhibition of DNA synthesis and supported a role for PKD-mediated ERK activation. These data demonstrate an essential and non-redundant role for PKD1 in reversion of differentiation in keratinocytes, partly through sustained activation of the ERK-MAPK pathway. These findings imply a critical role for PKD in conditions such as wound healing and tumor formation where the normal differentiation process may be reversed.