Mice lacking p63, a single gene that encodes a group of transcription factors that either contain (TA) or lack (ΔN) a transactivation domain, fail to develop stratified epithelia as well as epithelial appendages and limbs. ΔNp63 isoforms are predominantly expressed during late embryonic and postnatal epidermal development, however, the function of these proteins remains elusive. Using an epidermal-specific inducible knockdown mouse model, we demonstrate that ΔNp63 proteins are essential for maintaining basement membrane integrity and terminal differentiation of keratinocytes. Furthermore, we have identified two ΔNp63α target genes that mediate these processes. We propose that ΔNp63α initially induces expression of the extracellular matrix component Fras1, which is required for maintaining the integrity of the epidermal–dermal interface at the basement membrane. Subsequently, induction of IκB kinase-α by ΔNp63α initiates epidermal terminal differentiation resulting in the formation of the spinous layer. Our data provide insights into the role of ΔNp63α in epidermal morphogenesis and homeostasis, and may contribute to our understanding of the pathogenic mechanisms underlying disorders caused by p63 mutations.