Ceramides in mammalian stratum corneum comprise a heterogeneous mixture of molecular species that subserve the epidermal permeability barrier, an essential function for survival in a terrestrial environment. In addition to a variation of sphingol species, hydroxylation of the amide-linked fatty acids contributes to the diversity of epidermal ceramides. Fatty acid 2-hydroxylase, encoded by the gene FA2H, the mammalian homologue of FAH1 in yeast, catalyzes the synthesis of 2-hydroxy fatty acid-containing sphingolipids. We assessed here whether FA2H accounts for 2-hydroxyceramide/2-hydroxyglucosylceramide synthesis in epidermis. Reverse transcription-PCR and Western immunoblots demonstrated that FA2H is expressed in cultured human keratinocytes and human epidermis, with FA2H expression and fatty acid 2-hydroxylase activity increased with differentiation. FA2H-siRNA suppressed 2-hydroxylase activity and decreased 2-hydroxyceramide/2-hydroxyglucosylceramide levels, demonstrating that FA2H accounts for synthesis of these sphingolipids in keratinocytes. Whereas FA2H expression and 2-hydroxy free fatty acid production increased early in keratinocyte differentiation, production of 2-hydroxyceramides/2-hydroxyglucosylceramides with longer chain amide-linked fatty acids (> or =C24) increased later. Keratinocytes transduced with FA2H-siRNA contained abnormal epidermal lamellar bodies and did not form the normal extracellular lamellar membranes required for the epidermal permeability barrier. These results reveal that 1) differentiation-dependent up-regulation of ceramide synthesis and fatty acid elongation is accompanied by up-regulation of FA2H; 2) 2-hydroxylation of fatty acid by FA2H occurs prior to generation of ceramides/glucosylceramides; and 3) 2-hydroxyceramides/2-hydroxyglucosylceramides are required for epidermal lamellar membrane formation. Thus, late differentiation-linked increases in FA2H expression are essential for epidermal permeability barrier homeostasis.