We have generated transgenic mice carrying the entire guinea-pig alpha-lactalbumin gene. Lactating transgenic mice expressed high levels of correctly initiated and processed guinea-pig alpha-lactalbumin mRNA in the secretory epithelium of their mammary glands, and secreted guinea-pig alpha-lactalbumin in their milk. Transcripts were detectable after 7 days of pregnancy, indicating that the transgene was under correct hormonal control. Whereas no or negligible transcription was detectable in all other tissues tested, high levels of transcripts were found in the skin of lactating transgenic mice. Guinea-pig alpha-lactalbumin protein was undetectable in the skin, however. In situ hybridization analysis showed that expression was localized to the undifferentiated cells in the basal layer of the sebaceous glands. Further studies revealed high levels of endogenous beta-casein mRNA in normal lactating mouse skin, demonstrating that the transcription of milk protein genes in lactating mouse skin is a normal event, and is not peculiar to the transgene. This surprising finding highlights the developmental relationship of the mammary gland to other specialized structures of the skin, supports a role for epithelial-extracellular matrix interactions in the regulation of milk protein gene expression in vivo, and identifies the skin as a particularly accessible model system in which to study the regulation of milk protein gene expression. In addition, the guinea-pig alpha-lactalbumin gene will be a source of regulatory sequences with which to direct heterologous gene expression to the sebaceous glands of transgenic mice.