Epidermal keratinocytes can express two types of interleukin 1 (IL-1) receptors: IL-1R1, which is active in signal transduction, and the less well characterized IL-1R2, which is incapable of transducing a signal and can be shed from cells. The binding of IL-1 in solution by IL-1R2 has been demonstrated, and it has been proposed to inhibit IL-1-mediated responses through this mechanism. We and others have reported that keratinocytes can be induced to express IL-1R2 both in vitro and in vivo, often under conditions that also favor IL-1 gene expression. We hypothesized that production of IL-1R2 by keratinocytes would be an efficient means to achieve local inhibition of IL-1-mediated responses without systemic consequences. To test this hypothesis, we have generated transgenic mice that constitutively express IL-1R2 on basal keratinocytes. Keratinocytes cultured from these animals shed the soluble form of the receptor into culture supernatants, and IL-1-inducible production of granulocyte/macrophage colony-stimulating factor was markedly inhibited. In vivo, acute cutaneous vascular leakage, as well as chronic inflammation induced by a well characterized IL-1-dependent stimulus, was significantly inhibited in IL-1R2 transgenic animals. In contrast, contact hypersensitivity was unaffected, suggesting that overexpression of IL-1R2 did not inhibit all types of inflammation globally. Finally, systemic injection of IL-1 induced equivalent levels of plasma IL-6 in IL-1R2 transgenic and nontransgenic mice, suggesting that the activity of the transgenic IL-1R2 remained predominantly local and did not influence systemic IL-1 responses. We conclude that tissue-specific production of IL-1R2 can mediate IL-1 antagonism in tissue microenvironments without systemic consequences. Our transgenic mice may be a useful tool for determining the degree to which different types of cutaneous inflammation depend on the IL-1 system.