This study was conducted to explore the mechanism of activation of transforming growth factor-beta1 (TGF-beta1) which is critical to its role in many physiological and pathological conditions. To date, almost all reports concerning TGF-beta1 activation delineated that release of mature TGF-beta1 from latency associated protein (LAP) is required for its activation. We report that latent TGF-beta1 (LTGF-beta1) released from TGF-beta1 genetically modified keratinocytes grown in the top chamber of a co-culture system functions as a fibrogenic factor through interaction with insulin-like growth factor-II/mannose-6-phosphate (IGF-II/M6P) receptors of human dermal fibroblasts grown in the lower chamber of this system. Following successful transduction, the pLin-LTGF-beta1 vector was amplified in PA31 7 packaging cells which possess viral structural proteins for vector in the presence of neomycin. Conditioned medium derived from packaging cells containing competent viral particles was then used to transduce either keratinocytes or fibroblasts grown in the upper chamber of a co-culture system, in which a 0.4 microm porous membrane separates the two chambers. In this way, LTGF-beta1 produced by transduced cells in the upper chamber is released and diffuses into the lower chambers where dermal fibroblasts are grown. Conditioned medium from the lower chamber was removed 3 days later and used to evaluate the latency and bioactivity of TGF-beta1 using enzyme-linked immunosorbent assay (ELISA) and mink lung (Mv1 Lu) epithelial growth inhibition assay. Cells were also harvested and used for RNA extraction. The results of these experiments showed that 1) the TGF-beta1-LAP complex, which was latent in traditionally used mink lung growth inhibition assay, directly modulated the expression of collagenase, type I, and type III collagen mRNA by dermal fibroblasts; 2) this stimulation was inhibited by M6P in a dose-dependent manner; 3) the TGF-beta1-LAP inhibits Mv1Lu epithelial cells only when this complex was incubated with cell membranes isolated from dermal fibroblasts; and 4) LTGF-beta1 activation seems to occur through a conformational alteration rather than by release of the mature TGF-beta1 from LAP in our co-cultured system. This conformational alteration seems to occur through the interaction of the TGF-beta1-LAP complex with the IGF-II/M6P receptors. Thus, the quantity of IGF-II/M6P receptors is important in cellular response to LTGF-beta1 in any physiological and pathological conditions.