Notch signaling promotes commitment of keratinocytes to differentiation and suppresses tumorigenesis. p63, a p53 family member, has been implicated in establishment of the keratinocyte cell fate and/or maintenance of epithelial self-renewal. Here we show that p63 expression is suppressed by Notch1 activation in both mouse and human keratinocytes through a mechanism independent of cell cycle withdrawal and requiring down-modulation of selected interferon-responsive genes, including IRF7 and/or IRF3. In turn, elevated p63 expression counteracts the ability of Notch1 to restrict growth and promote differentiation. p63 functions as a selective modulator of Notch1-dependent transcription and function, with the Hes-1 gene as one of its direct negative targets. Thus, a complex cross-talk between Notch and p63 is involved in the balance between keratinocyte self-renewal and differentiation.