The epidermis is a stratified squamous epithelium, which is under a constant state of proliferation, commitment, differentiation, and elimination so that the functional integrity of the tissue is maintained. The intact epidermis has the ability to respond to diverse environmental stimuli by continuous turnover to maintain its normal homeostasis throughout an organism's life. This is achieved by a tightly regulated balance between stem cell self-renewal and the generation of a population of cells that undergo a limited number of more rapid (amplifying) transit divisions before giving rise to nonproliferative, terminally differentiating cells. This process makes it an excellent model system to study lineage, commitment, and differentiation, although neither the identity of epidermal stem cells nor the precise steps and regulators that lead to mature epidermal cells have yet been determined. Furthermore, the identities of genes that initiate epidermal progenitor commitment to the epidermal lineage, from putative epidermal stem cells, are unknown. This is mainly due to the lack of an in vitro model system, as well as the lack of specific reagents, to study the early events in epidermal lineage. Our recent development of a differentiating embryonic stem cell model for epidermal lineage now offers the opportunity to analyze the factors that regulate epidermal lineage. These studies will provide new insight into epidermal lineage and lead to a better understanding of various hyperproliferative skin diseases such as psoriasis and cancer.