The family of transcription factors Activating protein-2 (AP-2) are known to play important roles in numerous developmental events, including those associated with differentiation of stratified epithelia. However, to date, the influence of the AP-2 genes on endogenous gene expression in the stratified epithelia and how this affects differentiation has not been well defined. The following study examines the detailed expression of the AP-2alpha and AP-2beta proteins in the stratified epithelia of the ocular surface, including that in the cornea and developing eyelids. The effect of altered levels of the AP-2alpha gene on ocular surface differentiation was also examined using a corneal epithelial cell line and AP-2alpha chimeric mice. Immunolocalization studies revealed that, while AP-2beta was broadly expressed throughout all cell layers of the stratified corneal epithelium, AP-2alpha expression was confined to cell compartments more basally located. AP-2alpha was also highly expressed in the less differentiated cell layers of the eyelid epidermis. Overexpression of the AP-2alpha gene in the corneal cell line, SIRC, resulted in a dramatic change in cell phenotype including a clumping growth behavior that was distinct from the smooth monolayer of the parent cell line. Accompanying this change was an up-regulation in levels of the cell adhesion molecule, N-cadherin. Examination of the ocular surface of AP-2alpha chimeric mice, derived from a mixed population of AP-2alpha-/- and AP-2alpha+/+, revealed that a down-regulation in E-cadherin expression is correlated with location of the AP-2alpha-/- null cells. Together, these findings demonstrate that AP-2alpha participates in regulating differentiation of the ocular surface through induction in cadherin expression.