SPINK5, encoding the putative multi-domain serine protease inhibitor LEKTI, was recently identified as the defective gene in the severe autosomal recessive ichthyosiform skin condition, Netherton syndrome (NS). Using monoclonal and polyclonal antibodies, we show that LEKTI is a marker of epithelial differentiation, strongly expressed in the granular and uppermost spinous layers of the epidermis, and in differentiated layers of stratified epithelia. LEKTI expression was also demonstrated in normal differentiated human primary keratinocytes (HK) through detection of a 145 kDa full-length protein and a shorter isoform of 125 kDa. Both proteins are N-glycosylated and rapidly processed in a post-endoplasmic reticulum compartment into at least three C-terminal fragments of 42, 65 and 68 kDa, also identified in conditioned media. Processing of the 145 and 125 kDa precursors was prevented in HK by treatment with a furin inhibitor. In addition, in vitro cleavage of the recombinant 145 kDa precursor by furin generated C-terminal fragments of 65 and 68 kDa, further supporting the involvement of furin in LEKTI processing. In contrast, LEKTI precursors and proteolytic fragments were not detected in differentiated HK from NS patients. Defective expression of LEKTI in skin sections was a constant feature in NS patients, whilst an extended reactivity pattern was observed in samples from other keratinizing disorders, demonstrating that loss of LEKTI expression in the epidermis is a diagnostic feature of NS. The identification of novel processed forms of LEKTI provides the basis for future functional and structural studies of fragments with physiological relevance.