The therapeutic recombinant human keratinocyte growth factor 1 (rhKGF-1) was approved by the FDA for oral mucositis resulting from hematopoietic stem cell transplantation for hematological malignancies in 2004. However, no recommended bioassay for rhKGF-1 bioactivity has been recorded in the U.S. Pharmacopoeia. In this study, we developed an rhKGF-1-dependent bioassay for determining rhKGF-1 bioactivity based on HEK293 and HaCat cell lines that stably expressed the luciferase reporter driven by the serum response element (SRE) and human fibroblast growth factor receptor (FGFR2) IIIb. A good responsiveness to rhKGF-1 and rhKGF-2 shared by target HEK293/HaCat cell lines was demonstrated. Our stringent validation was completely focused on specificity, linearity, accuracy, precision, and robustness according to the International Council for Harmonization (ICH) Q2 (R1) guidelines, AAPS/FDA Bioanalytical Workshop and the Chinese Pharmacopoeia. We confirmed the reliability of the method in determining rhKGF bioactivity. The validated method is highly timesaving, sensitive, and simple, and is especially valuable for providing information for quality control during the manufacture, research, and development of therapeutic rhKGF.