The basal layer of the epidermis contains stem cells and transit amplifying (TA) cells that rapidly proliferate and differentiate further into the upper layers of the epidermis. A number of molecules have been identified as regulators for this process including p63 and Notch1. However, little is known about the mechanisms that regulate the transitions from stem cells to proliferating or differentiating TA cells. Here we demonstrate that Epiprofin (Epfn) plays critical 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 formed multiple layers due to accumulation of premature TA cells with reduced proliferation, and a reduction in differentiating keratinocytes expressing Notch1. We found that low levels of Epfn expression increased proliferation of human immortalized keratinocyte (HaCaT) cells by increasing EGF-responsiveness and superphosphorylation of Rb. In 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 Epiprofin in epidermal development.