Mammalian epidermis is a stratified epithelium that serves as a barrier protecting the organism from mechanical stress and dehydration. Previous studies have demonstrated the importance of the actin cytoskeleton in the establishment of a functional skin epithelium. Despite what is known about the actin cytoskeleton in epithelial sheet formation, the molecules important for controlling the actin cytoskeleton during epidermal development have not been determined. Serum response factor (SRF) is a transcription factor that is considered to be an important regulator of the actin cytoskeleton. To examine the role of SRF in the developing mouse epidermis, we have employed gene targeting to ablate Srf in keratinocytes. Conditional inactivation of Srf during the embryonic timepoint leads to a defect in the organization of the epidermis. Immunohistochemical analyses demonstrated a marked loss of the filamentous actin cytoskeleton and E-cadherin localization in epidermis, as well as an aberration in the localization of tight junction proteins. Moreover, impairment of the "inside-out" epidermal barrier was shown. Srf conditional knockout keratinocytes are unable to establish proper intercellular connections or form an epithelial sheet as shown by histological examination and induced keratinocyte differentiation experiments. Our results demonstrate that Srf is essential for the actin-mediated sealing of epithelial cell-cell contacts and the development of functional stratified skin epithelium in vivo.