Recently, considerable interest has focused on the ability of activated peroxisome proliferator-activated receptor gamma (PPARgamma) to promote cytodifferentiation in adipocytes and some carcinoma cells; however, the role of PPARgamma in normal epithelial cytodifferentiation is unknown. Using uroplakin (UP) gene expression as a specific correlate of terminal urothelial cytodifferentiation, we investigated the differentiation-inducing effects of PPARgamma activation in normal human urothelial (NHU) cells grown as finite cell lines in monoculture. Two high-affinity activators of PPARgamma, troglitazone (TZ) and rosiglitazone (RZ) induced the expression of mRNA for UPII and UPIb and, to a lesser extent, UPIa. The specificity of the effect was shown by pretreating cells with a PPARgamma antagonist, GW9662, which attenuated the TZ-induced response in a dose-specific manner. The PPARgamma-mediated effect on UP gene expression was maximal when there was concurrent inhibition of autocrine-activated epidermal growth factor receptor (EGFR) signalling through either the phosphatidylinositol 3-kinase or extracellular signal-regulated kinase (ERK) pathways. The use of a specific EGFR tyrosine kinase inhibitor, PD153035, correlated with PPARgamma dephosphorylation and translocation to the nucleus, indicating a mechanism for regulating the balance between proliferation and differentiation. This is the first identification of specific factors involved in regulating differentiation-associated gene changes in urothelium and the first unambiguous evidence of a role for PPARgamma signalling in the terminal differentiation programme of a normal epithelium.