Glucocorticoids (GCs) are potent inhibitors of epidermal proliferation and effective anti‐inflammatory compounds, which make them the drug of choice for a wide range of inflammatory and hyperproliferative skin disorders. GC action is mediated via the glucocorticoid receptor (GR). To study the role of GR in skin development and the molecular mechanisms underlying its action, we generated transgenic mice overexpressing GR in epidermis and other stratified epithelia, under the control of the keratin K5 promoter. Newborn mice show altered skin development, manifested as variable‐sized skin lesions that range from epidermal hypoplasia and underdeveloped dysplastic hair follicles to a complete absence of this tissue. In the most affected individuals, skin was absent at the cranial and umbilical regions, and the vibrissae and eyebrows appear scarce, short, and curly. In addition, as a consequence of transgene expression in other ectodermally derived epithelia, K5‐GR mice exhibited further abnormalities that strikingly resemble the clinical findings in patients with ectodermal dysplasia, which includes aplasia cutis congenita. In adult transgenic skin, topical application of the tumor promoter TPA did not elicit hyperplasia or transcriptional induction of several proinflammatory cytokines. This anti‐inflammatory role of GR was due at least in part to interference with NF‐κB, leading to a strong reduction in the κB‐binding activity without altering the transcriptional levels of the inhibitor IκBα.