In five lines of cultured human squamous carcinoma cells, transglutaminase activity and envelope competence were highly sensitive to retinoic acid and calcium levels in the growth medium. In cells grown in low calcium medium, these measures of keratinocyte differentiation were reduced. Retinoic acid suppressed envelope competence but total transglutaminase activity was markedly reduced, slightly affected, or greatly stimulated depending upon the cell line and whether the cells were grown in low calcium or 1.8 mM calcium-containing medium. Examination by anion exchange chromatography of the transglutaminase activity in SCC-12B2 cultures showed that expression of the particulate form (type I) of the enzyme was greatly stimulated by calcium. The increase in this activity to high levels that occurs at confluence could be almost completely suppressed by retinoic acid in the medium. The soluble form (type II) in the SCC-12B2 cells was induced in growing or confluent cultures by retinoic acid independent of the calcium concentration in the medium, but the 50% effective concentration (100 nM) for its stimulation was approximately 50-fold higher than the 50% effective concentration for suppression of the type I enzyme (2 nM). Thus, these enzymes appear to be distinct and independently regulated. This conclusion is supported by the finding that SCC-4 and SCC-9 almost exclusively expressed types II and I forms, respectively. In contrast to the results with neoplastic cells, in cultured normal epidermal cells type I enzyme comprised the overwhelming majority of activity and was only partially (75-90%) suppressible by retinoic acid, while type II enzyme seemed poorly if at all stimulable. Thus, the SCC lines appear appropriate for studying biochemical mechanisms of action of certain physiological agents, the molecular basis for altered regulation of differentiated function in neoplastic cells, and the origin of diversity within tumors.