A factor inhibiting the calcium-induced terminal differentiation of cultured mouse keratinocytes was purified to homogeneity from the extracellular products of S. aureus E-1 and designated 'epidermal cell differentiation inhibitor' (EDIN). EDIN activity was sensitive to trypsin and heat-labile, suggesting that EDIN is a protein. EDIN gave a single band with a molecular weight of 27,000 on sodium dodecyl sulfate-polyacrylamide gel electrophoresis and was found to be a single chain polypeptide, having an isoelectric point higher than 9. The N-terminal amino acid sequence of EDIN was determined as A-D-V-K-N-F-T-D-L. EDIN inhibited the differentiation of not only mouse but also human keratinocytes in culture.