To address the functions of Rac1 in keratinocytes of the basal epidermal layer and in the outer root sheath of hair follicles, we generated transgenic mice expressing a dominant inhibitory mutant of Rac, N17Rac1, under the control of the keratin 14 promoter. These mice do not exhibit an overt skin phenotype but show protracted skin wound re-epithelialization. Investigation into the underlying mechanisms revealed that in vivo both proliferation of wound-edge keratinocytes and centripetal migration of the neo-epidermis were impaired. Similar results were obtained in mice with an epidermis-specific deletion of Rac1. Primary epidermal keratinocytes that expressed the N17Rac1 transgene were less proliferative than control cells and showed reduced ERK1/2 phosphorylation upon growth factor stimulation. Adhesion, spreading, random migration and closure of scratch wounds in vitro were significantly inhibited on collagen I and, to a lesser extent, on fibronectin. Stroboscopic analysis of cell dynamics (SACED) of N17Rac1 transgenic and control keratinocytes identified decreased lamella-protrusion persistence in connection with increased ruffle frequency as a probable mechanism for the observed impairment of keratinocyte adhesion and migration. We conclude that Rac1 is functionally required for normal epidermal wound healing and, in this context, exerts a dual function – namely the regulation of keratinocyte proliferation and migration.