Growth and differentiation of keratinocytes in a serum‐free medium (keratinocyte growth medium of KGM) was studied and compared to that under conditions in which serum and feeder cell layers were used. Cells were grown in KGM containing 0.1 mM calcium (KGM/low calcium), KGM containing 1.2 mM calcium (KGM/normal calcium), or Dulbecco's modified Eagles medium containing 5% fetal calf serum and 1.8 mM calcium in presence of mitomycin treated 3T3 M cells (DMEM/5% FCS). Plating efficiency and rate of growth were similar in the three media till confluence. In postconfluent cultures, protein and DNA content of cells attached to the plate in KGM/low‐calcium dishes decreased as an increased number of cells were shed into the medium. Cell shedding was much less evident in the presence of normal calcium. Cells grown in KGM/low calcium had a higher rate of cell proliferation (³H‐thymidine incorporation into cellular DNA) than cells grown in normal calcium. Transglutaminase activity, involucrin content, and cornified envelope formation were greatest in cells grown in KGM/normal calcium, intermediate in cells grown in DMEM/5% FCS, and least in cells grown in KGM/low calcium. Keratin profiles from cells grown in KGM/low calcium showed a lower percentage of high molecular weight bands compared to the keratin profiles from cells grown in the presence of normal calcium. Keratinocytes in KGM/low calcium grew as a monolayer of cuboidal cells with few features of differentiation, whereas cells grown in KGM/normal calcium stratified into multilayered islands (3–5 layers) surmounted by 2–4 layers of enucleated cells with thickened cornified envelopes. Cells grown in KGM/normal calcium also contained tonofilaments and lamellar bodies unlike cells grown in KGM/low calcium. Cells grown in DMEM/5% FCS also formed stratified layers comparable to cells grown in KGM/normal calcium but lacked cornified cells, keratohyalin granules, tonofilament bundles, and lamellar bodies. These studies indicate the usefulness of serum‐free conditions for the culture of human keratinocytes and confirm the importance of extracellular calcium in keratinocyte differentiation.