In this study we have investigated hyaluronan (HA)-CD44 interaction with protein kinase N-gamma (PKNgamma), a small GTPase (Rac1)-activated serine/threonine kinase in human keratinocytes. By using a variety of biochemical and molecular biological techniques, we have determined that CD44 and PKNgamma kinase (molecular mass approximately 120 kDa) are physically linked in vivo. The binding of HA to keratinocytes promotes PKNgamma kinase recruitment into a complex with CD44 and subsequently stimulates Rac1-mediated PKNgamma kinase activity. The Rac1-activated PKNgamma in turn increases threonine (but not serine) phosphorylation of phospholipase C (PLC) gamma1 and up-regulates PLCgamma1 activity leading to the onset of intracellular Ca(2+) mobilization. HA/CD44-activated Rac1-PKNgamma also phosphorylates the cytoskeletal protein, cortactin, at serine/threonine residues. The phosphorylation of cortactin by Rac1-PKNgamma attenuates its ability to cross-link filamentous actin in vitro. Further analyses indicate that the N-terminal antiparallel coiled-coil (ACC) domains of PKNgamma interact directly with Rac1 in a GTP-dependent manner. The binding of HA to CD44 induces PKNgamma association with endogenous Rac1 and its activity in keratinocytes. Transfection of keratinocytes with PKNgamma-ACCcDNA reduces HA-mediated recruitment of endogenous Rac1 to PKNgamma and blocks PKNgamma activity. These findings suggest that the PKNgamma-ACC fragment acts as a potent competitive inhibitor of endogenous Rac1 binding to PKNgamma in vivo. Most important, the PKNgamma-ACC fragment functions as a strong dominant-negative mutant that effectively inhibits HA/CD44-mediated PKNgamma phosphorylation of PLCgamma1 and cortactin as well as keratinocyte signaling (e.g. Ca(2+) mobilization and cortactin-actin binding) and cellular functioning (e.g. cell-cell adhesion and differentiation). Taken together, these findings strongly suggest that hyaluronan-CD44 interaction with Rac1-PKNgamma plays a pivotal role in PLCgamma1-regulated Ca(2+) signaling and cortactin-cytoskeleton function required for keratinocyte cell-cell adhesion and differentiation.