Chemical carcinogenesis in mouse skin has been useful in delineating the molecular events that underlie squamous cell carcinoma progression. A late event in this progression, the epithelial-to-mesenchymal transition (EMT), is characterized by the loss of epithelial markers and the presence of mesenchymal markers. One mesenchymal marker associated with this transition is the matrix metalloproteinase stromelysin 1 (Str-1). To examine the molecular mechanisms regulating the expression of Str-1 during the EMT, genetically related mouse skin tumor cell lines representing the epithelial (B9^SQ) and mesenchymal (A5^SP) phenotypes were studied. As expected, B9^SQ cells did not make Str-1, while A5^SP cells did. B9^SQ-A5^SP somatic hybrids did not make Str-1, suggesting that a critical regulatory factor was a B9^SQ-specific repressor. Str-1 promoter analysis revealed that a canonical AP-1 site was sufficient to maintain differential reporter gene activity. This result correlated with the observed loss of binding of the transcriptionally inactive JunB-Fra-2 AP-1 complex from B9^SQ cells, being replaced primarily by the more active JunD-Fra-2 complex in A5^SP cells. The higher level of JunB binding to both DNA and Fra-2 correlated with its hyperphosphorylation by Jun N-terminal kinase, an activity that was significantly higher in B9^SQ cells. In the somatic hybrids, JunB gene expression was highly upregulated, a condition that also was sufficient to repress the expression of the endogenous Str-1 gene in A5^SP cells. These data suggested that alterations in JunB activity, by changes in either phosphorylation or gene expression, contributed to the phenotypic differences that occur in this model of the EMT.