Transforming growth factor beta1(TGF-beta1) is a stimulator of malignant progression in mouse skin carcinogenesis. TGF-beta1 exerts a differential effect on cultured nontumorigenic (MCA3D cell line) and transformed (PDV cell line) keratinocytes. Whereas MCA3D cells are growth arrested and committed to die in the presence of the factor, it induces a reversible epithelial-fibroblastic conversion in PDV cells. This conversion is associated in vivo with a squamous-spindle cell carcinoma transition. Here we have investigated the role of urokinase (uPA) during malignant progression of transformed epidermal keratinocytes. We show that the levels of uPA expression/secretion, and the uPA binding activity to the cell surface, correlate with the invasive and malignant potentials of mouse epidermal cell lines. TGF-beta1 enhanced uPA production, the number of uPA cell surface binding sites, and the expression of the plasminogen activator inhibitor PAI-1, in transformed PDV cells, but had no major effect on nontumorigenic MCA3D keratinocytes. Increased uPA production depended on the presence of the factor in the culture medium and occurred concomitantly to the stimulation of the migratory and invasive abilities of PDV cells. Synthetic peptides containing the amino terminal sequence of the mature mouse uPA inhibited the binding of uPA to the cell surface and decreased TGF-beta1-induced cell motility and invasiveness. These results demonstrate that the uPA system mediates at least part of the migratory and invasive phenotype induced by TGF-beta1 in transformed keratinocytes, and suggest a role for uPA on the changes that lead to the appearance of spindle carcinomas.