Using an antibody directed against gamma-secretase-generated antigen unique to activated Notch1, we mapped Notch1 activation strictly to suprabasal cells in epidermis, nail matrix, and other skin appendages during normal development. The consequences of Notch1 activation in keratinizing nail cells were investigated in a transgenic mouse model. Ectopic activation of Notch1 in postmitotic cells within the nail keratogenous zone resulted in longer nails. BrdU labeling revealed an increased number of mitotic cells in transgenic nails. The matrix and keratogenous zone expanded distally due to the increase in cell numbers. The mitosis-promoting effects by a gene product expressed exclusively in postmitotic cells indicates a long-range effect of transgenic Notch1 on regulation of nail homeostasis. We demonstrate that activation of Notch1 in the keratogenous zone resulted in ectopic activation of Wnt signaling, the first such evidence in vertebrates. However, we detected little or no beta-catenin activation in proliferating matrix cells, indicating that Wnt is at most an indirect mediator of Notch-induced proliferation. These data support the existence of a novel, cell-nonautonomous role for Notch in maintaining homeostasis of stratified squamous epithelia by indirectly promoting mitosis in basally located cells.