To elucidate the biological role of Stat3 in the skin, conditional gene targeting using the Cre‐loxP system was performed as germline Stat3 ablation leads to embryonic lethality. K5‐Cre; Stat3 flox/− transgenic mice, whose epidermal and follicular keratinocytes lack functional Stat3, were viable and the development of epidermis and hair follicles appeared normal. However, hair cycle and wound healing processes were severely compromised. Furthermore, mutant mice expressed sparse hair and developed spontaneously occurring ulcers with age. Growth factor‐dependent in vitro migration of Stat3‐disrupted keratinocytes was impaired despite normal proliferative responses. We therefore conclude that Stat3 plays a crucial role in transducing a signal required for migration but not for proliferation of keratinocytes, and that Stat3 is essential for skin remodeling, including hair cycle and wound healing.