The basal layer of the epidermis contains stem cells and transit amplifying cells that rapidly proliferate and differentiate further into the upper layers of the epidermis. A number of molecules have been identified as regulators of this process, including p63 (also known as tumor protein 63) and Notch1. However, little is known about the mechanisms that regulate the transitions from stem cell to proliferating or differentiating transit amplifying cell. Here, we demonstrate that epiprofin (Epfn, also known as Sp6) plays crucial distinct roles in these transition stages as a cell cycle regulator and a transcription factor. Epfn knockout mice have a thickened epidermis, in which p63-expressing basal cells form multiple layers owing to the accumulation of premature transit amplifying cells with reduced proliferation and a reduction in the number of differentiating keratinocytes expressing Notch1. We found that low levels of Epfn expression increased the proliferation of human immortalized keratinocyte (HaCaT) cells by increasing EGF responsiveness and superphosphorylation of Rb. By contrast, high levels of Epfn expression promoted cell cycle exit and differentiation, by reducing E2F transactivation and inducing Notch1 expression. Our findings identify multiple novel functions of Epfn in epidermal development.