Various factors are known to regulate cell growth and differentiation in epithelial-mesenchymal interactions. Keratinocyte growth factor (KGF), an epithelial-specific cytokine produced by dermal fibroblasts and other mesenchymal cells, appears to affect growth, migration, and differentiation in epithelial-mesenchymal interactions. We have previously shown that human embryonic skin fibroblasts induce anchorage-independent growth of HPV16 DNA-immortalized human uterine exocervical epithelial cells (HCE16/3 cell line) in cocultures of HCE16/3 cells and fibroblasts. Here we report that KGF may be a major factor influencing growth and behavior of HCE16/3 cells in the coculture system. KGF stimulated both DNA synthesis and proliferation of normal human cervical epithelial (HCE) cells and HCE16/3 cells and the increase was stronger in HCE16/3 cells than in HCE cells. SiHa cells, a cervical carcinoma cell line with integrated HPV16 DNA, did not respond to the KGF mitogen signal. KGF receptor (KGFR) studies suggested that the different responses to the KGF mitogen signal may be correlated with KGFR. In addition, KGF alone was able to induce anchorage-independent growth of HCE16/3 cells, suggesting a potential role for KGF in the transformation process of epithelial cells. However, the transcription of HPV16 early genes was suppressed by KGF in the immortalized HCE16/3 cells, and this appeared to be due to transcriptional repression rather than a posttranscriptional process according to nuclear run-on analysis. In contrast, viral gene expression was not affected by KGF in SiHa cells. Our results suggest that KGF is a bifunctional growth factor in the HPV-immortalized cells, a positive regulator of cell growth and negative regulator of HPV16 early gene expression.