Epidermal growth factor receptor (EGFR) is a key regulator of keratinocyte biology. However, the physiological role of EGFR in vivo has not been well established. To analyze the role of EGFR in skin, we have generated transgenic mice expressing an EGFR dominant negative mutant in the basal layer of epidermis and outer root sheath of hair follicles. Mice expressing the mutant receptor display short and waved pelage hair and curly whiskers during the first weeks of age, but subsequently pelage and vibrissa hairs become progressively sparser and atrophic. Eventually, most mice present severe alopecia. Histological examination of the skin of transgenic mice shows striking alterations in the development of hair follicles, which fail to enter into catagen stage. These alterations eventually lead to necrosis and disappearance of the follicles, accompanied by strong infiltration of the skin with inflammatory elements. The interfollicular epidermis of these mice shows marked hyperplasia, expression of hyperproliferation‐associated keratin K6 and increased 5‐bromo‐2‐deoxyuridine incorporation. EGFR function was inhibited in transgenic skin keratinocytes, since in vivo and in vitro autophosphorylation of EGFR was almost completely abolished on EGF stimulation. These results implicate EGFR in the control of hair cycle progression, and provide new information about its role in epidermal growth and differentiation.