UV irradiation of the skin causes immune suppression by a mechanism involving epidermal cytokines. To determine the role of epidermal DNA damage in immune suppression, we used HindIII restriction endonuclease encapsulated in liposomes to cause DNA strand breaks in epidermal cells in vivo and in vitro. Topical application of HindIII in liposomes to murine skin in vivo impaired the induction of contact hypersensitivity responses initiated either locally or at distant sites and impaired the function of APCs. Unlike UV-B radiation, however, treatment of mice with HindIII in liposomes before contact sensitization did not induce tolerance or transferable suppression. The liposome-encapsulated HindIII caused double strand breaks in DNA and induced IL-10 and TNF-alpha production when added to cells of a murine keratinocyte line in vitro. Topical application of liposomal HindIII also induced TNF-alpha in the epidermis of mice. Liposomes containing heat-inactivated HindIII or an endonuclease specific for pyrimidine dimers in DNA did not exhibit these effects. These results support the hypothesis that DNA damage is a trigger for the production of cytokines that modulate immune responses. They also suggest that immune suppression and suppressor cell induction are separate consequences of cutaneous injury that require different stimuli.