Both beta-catenin and plakoglobin can stimulate the expression of Lef/Tcf target genes in vitro. beta-Catenin is known to associate with Lef/Tcf factors and to participate directly in transactivation in vivo, whereas the role of plakoglobin in transcriptional regulation has been less studied. To analyze the functions of plakoglobin in vivo, we generated transgenic mice expressing in the epidermis N-terminally truncated plakoglobin (DeltaN122-PG) lacking the glycogen synthase kinase 3beta phosphorylation sites and therefore protected against degradation (transgenic line K5-DeltaN122-PG). The expression of DeltaN122-PG led to the formation of additional hair germs, hyperplastic hair follicles, and noninvasive hair follicle tumors, a phenotype reminiscent of that induced by expression of N-terminally truncated beta-catenin. However, if expressed in beta-catenin-null epidermis, DeltaN122-PG did not induce new hair follicle germs and follicular tumors. Thus, DeltaN122-PG cannot substitute for beta-catenin in its signaling functions in vivo and the phenotype observed in K5-DeltaN122-PG mouse skin must be due to the aberrant activation of beta-catenin signaling. On the other hand, the expression of DeltaN122-PG in beta-catenin-null skin significantly increased the survival rate of mutant mice, rescued differentiation, and limited excessive proliferation in the interfollicular epidermis, suggesting that plakoglobin may be involved in the intracellular signaling events essential for epidermal differentiation.