We identified REDD1 as a novel transcriptional target of p53 induced following DNA damage. During embryogenesis, REDD1 expression mirrors the tissue-specific pattern of the p53 family member p63, and TP63 null embryos show virtually no expression of REDD1, which is restored in mouse embryo fibroblasts following p63 expression. In differentiating primary keratinocytes, TP63 and REDD1 expression are coordinately downregulated, and ectopic expression of either gene inhibits in vitro differentiation. REDD1 appears to function in the regulation of reactive oxygen species (ROS); we show that TP63 null fibroblasts have decreased ROS levels and reduced sensitivity to oxidative stress, which are both increased following ectopic expression of either TP63 or REDD1. Thus, REDD1 encodes a shared transcriptional target that implicates ROS in the p53-dependent DNA damage response and in p63-mediated regulation of epithelial differentiation.