Purpose.To examine the role of epithelial cells in inducing the differentiation of keratocytes into myofibroblasts and to determine whether this effect may be inhibited by amniotic membrane matrix.Methods.In vivo, a 9-mm diameter, partial-thickness corneal flap was created in 12 rabbit eyes (6 rabbits), which were equally subdivided into three groups. The first group was implanted with one layer of a 6-mm diameter human amniotic membrane, from which the epithelium had been removed by dispase. The second group received an implantation of dispase-treated amniotic membrane with cultured rabbit corneal epithelial cells. The third group received the same implantation as the second group except that the cultured corneal epithelial cells were sandwiched between two layers of membrane. All corneas were removed 2 weeks later and were subjected to Masson trichrome staining and immunofluorescence staining with monoclonal antibodies to &agr;-smooth muscle (&agr;-SM) actin for myofibroblasts and cytokeratins for epithelial cells. In vitro collagen gels impregnated with different types of human ocular surface fibroblasts were seeded with or without rabbit corneal epithelial cells before testing for gel contraction.Results.Positive staining of &agr;-SM actin was noted only in keratocytes adjacent to corneal epithelial cells at the incision site and those grown on the basement membrane side of the amniotic membrane. Negative staining was noted when epithelial cells were removed by dispase or when cultured corneal epithelial cells were sandwiched between two layers of membrane. Gel contraction by fibroblasts was significantly promoted when epithelial cells were seeded on the gel. In the latter situation, positive staining of &agr;-SM actin was noted in fibroblasts subjacent to epithelial cells but not in those impregnated in the gel.Conclusion.Epithelial cells are capable of inducing the differentiation of adjacent fibroblasts into myofibroblasts; such an induction requires a close epithelial–mesenchymal contact. Amniotic membrane alone does not induce this effect and can help block such induction by epithelial cells.