The skin functions as a barrier protecting the body from dehydration and environmental insults. This barrier function is mainly provided by the outermost layer of the skin, the epidermis. The epidermis is maintained by epidermal stem cells which reside in the basal layer and which generate daughter cells that move upward toward the surface of the skin. During this journey, keratinocytes undergo a series of biochemical and morphological changes that result in the formation of the various layers of the epidermis. Eventually, these cells turn into the outermost layer of dead cornified cells that are sloughed into the environment. This review summarizes our current understanding of the mechanisms that control proliferation and differentiation of epidermal stem cells, and thus addresses fundamental processes that control epidermal morphogenesis and function.