Keratinocytes expressing the human papillomavirus (HPV) type 16 E7 protein, as a transgene driven by the K14 promoter, form a murine model of HPV-mediated epithelial cancers in humans. Our previous studies have shown that K14E7 transgenic skin grafts onto syngeneic mice are not susceptible to immune destruction despite the demonstrated presence of a strong, systemic CTL response directed against the E7 protein. Consistent with this finding, we now show that cultured, E7 transgenic keratinocytes (KC) express comparable endogenous levels of E7 protein to a range of CTL-sensitive E7-expressing cell lines but are not susceptible to CTL-mediated lysis in vitro. E7 transgenic and non-transgenic KC are susceptible to conventional mechanisms of CTL-mediated lysis, including perforin and Fas/FasL interaction when an excess of exogenous peptide is provided. The concentration of exogenous peptide required to render a cell susceptible to lysis was similar between KC and other conventional CTL targets (e.g. EL-4), despite large differences in H-2Db expression at the cell surface. Furthermore, exposure of KC to IFN-γ increased H-2Db expression, but did not substantially alter the exogenous peptide concentration required to sensitize cells for half maximal lysis. In contrast, the lytic sensitivity of transgenic KC expressing endogenous E7 is modestly improved by exposure to IFN-γ. Thus, failure of CTL to eliminate KC expressing endogenous E7, and by inference squamous tumours expressing E7, may reflect the need for a sustained, local inflammatory environment during the immune effector phase.