Psoriasis is characterized by immune activation, increased proliferation and abnormal differentiation of keratinocytes. The reported anti-psoriatic mechanisms of action in vivo of vitamin D analogues include reduction of keratinocyte proliferation and induction of keratinocyte terminal differentiation. We investigated whether the anti-psoriatic effect of the natural active vatamin D analogue, calcitriol, applied topically, is due to direct effects on keratinocytes alone or also due to immunoregulatory effects of calcitriol. Psoriasis patients were treated with topical calcitriol (0.005%) and a vehicle control for 8 weeks. Disease activity was assessed by a severity index and quantitative histopathological markers. In vitro studies of lymphocyte proliferation and gamma interferon secretion and of keratinocyte proliferation complemented the clinicohistopathologic studies. A heterogeneous response to calcitriol treatment could be segregated based upon elimination of K-16 keratin expression. Calcitriol treatment decreased keratinocyte proliferation, normalized keratinocyte differentiation and decreased immune activation in plaques. The histologic response to vitamin D treatment of psoriasis includes suppression of both immune and keratinocyte activation in situ. These studies provide a basis for rational combination of anti-psoriatic treatments and for the design of new vitamin D analogues to treat psoriasis.