Recently it has been shown that apolipoprotein E (apoE) secreted by keratinocytes in transplanted epidermal grafts reaches the systemic circulation. In this study we ask which cells in cultures of epidermal keratinocytes, basal or suprabasal, are the source of apoE. By fractionating disaggregated cultures in gradients of Ficoll400, the small nondifferentiated cells derived from the basal compartment were shown to be the source of apoE. The larger more differentiated cells derived from suprabasal layers could not be shown to contain or secrete apoE, although they did contain the apoE mRNA. Basal cells are the primary site for replication. However, analysis during growth in culture indicated that secretion did not correlate with cell replication but appeared to be linked to specific changes in metabolic activity of the basal cell compartment. Localization of apoE secretion to the basal compartment may provide a mechanism for lipid uptake and redistribution within the epidermis and may be viewed within the larger context of keratinocyte differentiation.