Squamous cell carcinoma (SCC) is the second most frequent skin cancer. The cellular origin of SCC remains controversial. Here, we used mouse genetics to determine the epidermal cell lineages at the origin of SCC. Using mice conditionally expressing a constitutively active KRas mutant (G12D) and an inducible CRE recombinase in different epidermal lineages, we activated Ras signaling in different cellular compartments of the skin epidermis and determined from which epidermal compartments Ras activation induces squamous tumor formation. Expression of mutant KRas in hair follicle bulge stem cells (SCs) and their immediate progeny (hair germ and outer root sheath), but not in their transient amplifying matrix cells, led to benign squamous skin tumor (papilloma). Expression of KRas^G12D in interfollicular epidermis also led to papilloma formation, demonstrating that squamous tumor initiation is not restricted to the hair follicle lineages. Whereas no malignant tumor was observed after KRas^G12D expression alone, expression of KRas^G12D combined with the loss of p53 induced invasive SCC. Our studies demonstrate that different epidermal lineages including bulge SC are competent to initiate papilloma formation and that multiple genetic hits in the context of oncogenic KRas are required for the development of invasive SCC.